A Recessionary Gap Is the Amount by Which

question 61

Multiple Choice

A recessionary gap is the amount by which

• A)the price level must adjust to achieve full employment.
• B)potential GDP exceeds real GDP.
• C)real GDP exceeds potential GDP.
• D)potential GDP must increase to achieve full employment at a given price level.
• E)aggregate demand will increase to achieve full employment at a given price level.

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Definitions:

Profit and Loss Ratio

An indicator that measures the ratio of profits earned to losses incurred over a particular period, often used to assess a company's financial health.

Income Summary

A temporary account in the ledger that summarizes revenue and expenses and transfers the balance (net income or net loss) to Capital. This account does not have a normal balance, i.e. it could have a debit or a credit balance.

Capital Balances

The amounts recorded in the capital accounts of a company or partnership, reflecting the initial capital contributions and subsequent changes including profits earned and withdrawals.

Losses

Financial reductions resulting from business activities, such as the sale of assets for less than their book value or operational losses.