The Economy's Output Gap Is Defined as the

question 96

Multiple Choice

The economy's output gap is defined as the

• A)difference between actual national income and desired aggregate expenditure.
• B)result of economic growth.
• C)difference between nominal GDP and real GDP.
• D)level of total output that would be produced if capacity utilization is at its normal rate.
• E)difference between actual GDP and potential GDP.

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Definitions:

Contribution Margin Ratio

The percentage of revenue remaining after deducting variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.

Variable Costs

Expenses that fluctuate with the level of production output, such as raw materials and direct labor.

Fixed Costs

Expenses that remain constant in total amount irrespective of fluctuations in the activity level of a business, e.g., insurance premiums.

Composite Unit

A grouping of assets or costs that are combined and treated as a single unit for accounting or valuation purposes.