Suppose That the Economy Has a Structural Deficit of $100

question 24

Multiple Choice

Suppose that the economy has a structural deficit of $100 billion and a budget deficit of $100 billion. It follows that output:

• A)must equal potential output.
• B)must be above potential output.
• C)must be below its potential output.
• D)could be at, above, or below potential output.

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Definitions:

Interest Rate

The percentage of an amount of money which is charged for its use per some period of time, often annually.

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true return on investment.

Nominal Rate

The interest rate before adjustments for inflation, as opposed to the real rate, which is adjusted for inflation.

Rate of Inflation

The percent change in the price level of goods and services in an economy over a period of time, usually measured annually.