Refer to the Above Diagram

question 224

Multiple Choice

Refer to the above diagram.If the full-employment level of GDP is B and aggregate expenditures are at AE₃, the:

• A)inflationary GDP gap is BC.
• B)recessionary GDP gap is BC.
• C)recessionary GDP gap is AB.
• D)inflationary expenditure gap is ed.

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Definitions:

Account Balances

The total amount of money in a financial account, calculated by adding all credits and subtracting all debits.

Expense Recognition Principle

An accounting principle that expenses should be recognized in the period in which they are incurred to produce revenues, aligning expenses with corresponding revenues.

Accounting Period

A specific time frame for which financial records are maintained and financial statements are prepared, usually annually or quarterly.

Earned

Income or revenue that has been realized through the sale of goods or services.