At Long-Run Macroeconomic Equilibrium,__________

question 389

Multiple Choice

At long-run macroeconomic equilibrium,__________ .

• A) an inflationary gap exists
• B) a recessionary gap exists
• C) real GDP equals potential GDP
• D) real GDP is less than potential GDP but is as close as it is possible to be

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Definitions:

Law of Diminishing Returns

An economic principle stating that as one input in the production process is incrementally increased, holding all other inputs constant, there will be a point at which the added output from each additional unit of input will start to decrease.

Dollars Per Unit

A unit cost measure representing the price or cost of a single item or measure of goods or services.

Elasticity of Product Demand

A measure of the responsiveness of the quantity demanded of a product to changes in its price.

Elasticity of Resource Demand

The measure of how much the quantity demanded of a resource changes in response to a change in its price.