If Actual Output Exceeds Potential Output, the Economy

question 21

Multiple Choice

If actual output exceeds potential output, the economy:

• A)is experiencing an inflationary gap.
• B)is experiencing a recessionary gap.
• C)may be in a long-run equilibrium but is not in a short-run equilibrium.
• D)is in neither a short-run nor long-run equilibrium.

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Definitions:

Self-Fulfilling Prophecy

A belief or expectation that influences a person to act in ways that cause the belief to become true.

Human Nature

The innate characteristics, including ways of thinking, feeling, and acting, which all human beings share.

Fundamental Attribution Error

A cognitive bias where people are more likely to attribute others' actions to their character or disposition rather than to external factors.

Internal Attributions

The process of ascribing the cause of one's own or others' behaviors and outcomes to internal, personal factors rather than to external or situational factors.