Consider the Equation GDP = F × (F_E/F)× (GDP/F_E)

question 55

Multiple Choice

Consider the equation GDP = F × (F_E/F) × (GDP/F_E) . If the economy enters a recessionary gap because of a negative aggregate demand shock, the equation changes in which of the following ways?

• A)the value of F_E/F falls as workers are laid off and equipment is used less intensively.
• B)the value of F_E/F rises as the rate of unemployment rises.
• C)the value of GDP/F_E falls as workers are laid off and equipment is used less intensively.
• D)there are no short- run changes in this case.
• E)the value of F falls as the rate of unemployment rises.

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