Refer to the Graph Shown

question 110

Multiple Choice

Refer to the graph shown. The economy begins at a level of output of $50 billion and experiences a one-year recession in which output declines by 3 percent. By what rate must the economy expand to return to potential output by year 2?

• A)About 3 percent
• B)About 4 percent
• C)About 6 percent
• D)About 9 percent

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Definitions:

Marginal Benefit

The extra benefit or pleasure that someone receives from using an additional unit of a specific good or service.

Marginal Cost

The increase in cost resulting from the production of one additional unit of a good or service.

Marginal Benefit

The extra utility or satisfaction that is derived from the consumption or manufacture of one more unit of a good or service.

Marginal Cost

The growth in complete cost caused by the manufacture of one more unit of a good or service.