-In the Above Figure, at the Point Where AD Equals

question 85

Multiple Choice

-In the above figure, at the point where AD equals SAS,

• A) the unemployment rate is zero.
• B) real GDP exceeds potential GDP.
• C) the economy is in a recession.
• D) potential GDP exceeds real GDP.

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Definitions:

Comparative Advantage

The ability of a country or firm to produce a particular good or service at a lower opportunity cost than its trade partners.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision. It represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Production Possibilities Frontier

A graphical representation showing the maximum quantity of two goods or services that an economy can produce when all resources are used efficiently.

Opportunity Cost

Opportunity cost is the value of the next best alternative forgone as a result of making a decision.