An Inflationary Output Gap Occurs When

question 34

Multiple Choice

An inflationary output gap occurs when

• A)actual GDP exceeds potential GDP.
• B)nominal GDP exceeds real GDP.
• C)demand for labour services is very low.
• D)equilibrium national income is below potential national income.
• E)potential GDP exceeds actual GDP.

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Definitions:

Actual Production

The total quantity of goods or services produced by a company during a specific period, measured to assess operational efficiency and effectiveness.

Direct Labor Cost

The total cost of all labor that is directly involved in the production of goods or services.

Manufacturing Overhead

The indirect factory-related costs that are incurred when producing a product.

Total Manufacturing Costs

The sum of all expenses directly associated with the production of goods, including direct labor, direct materials, and manufacturing overhead.