If the Economy Is in an Expansion, It Is Likely

question 83

Multiple Choice

If the economy is in an expansion, it is likely that

• A)the economy is not in equilibrium and is therefore not on the aggregate demand curve.
• B)the aggregate demand curve intersects the inflation adjustment line at a level of real GDP that is less than potential GDP.
• C)the aggregate demand curve and the inflation adjustment line do not intersect.
• D)the aggregate demand curve intersects the inflation adjustment line at a level of real GDP that is higher than potential GDP.
• E)aggregate expenditures are unequal to real GDP.

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Definitions:

Externality

An economic effect of a transaction that affects third parties who did not choose to be involved in the transaction.

Externality

An externality is a cost or benefit caused by a producer that is not financially incurred or received by that producer.

Market Exchange

The process through which goods, services, or assets are traded between buyers and sellers at a determined price.

Negative Externalities

Unintended and unfavourable outcomes of an activity or transaction that affect third-party stakeholders who did not choose to be involved in that activity.