Suppose That Potential Output Is $5 Trillion and Real GDP

question 18

Multiple Choice

Suppose that potential output is $5 trillion and real GDP is currently $5.5 trillion. In the long run, we would expect that:

• A) real GDP will rise.
• B) wages and input prices will fall.
• C) the price level will rise.
• D) all of the above

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Definitions:

Tax Revenue

The tax revenue that governments obtain.

Equilibrium Quantity

The amount of products or services available and sought after at the balance price within a marketplace.

Opportunity Cost

Opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen.

Consumer Surplus

The separation between the total amount consumers are equipped and willing to pay for a good or service and what is effectively paid.