Which of the Following Correctly Describes the Meaning of the Expression

question 86

Multiple Choice

Which of the following correctly describes the meaning of the expression Y < Y*?

• A)actual output is less than potential output - a recessionary gap
• B)potential output is less than actual output - a recessionary gap
• C)actual output is less than potential output - an inflationary gap
• D)potential output is less than actual output - an inflationary gap

---

Definitions:

Deflation

A decrease in the general price level of goods and services, often indicating reduced consumer demand or increased supply.

International Trade Agreements

Treaties between two or more nations that outline the rules and regulations for trade between them, facilitating smoother and increased trade.

Monetary Unions

Monetary unions are agreements between two or more states to share a common currency and monetary policy, aimed at facilitating economic stability and integration, such as the European Monetary Union.

Currency Exchange Rate

The price of one country’s currency in terms of another country’s currency.