Potential GDP Is the Level of Real GDP at Which

question 103

Multiple Choice

Potential GDP is the level of real GDP at which

• A)aggregate demand equals short-run aggregate supply.
• B)there is full employment.
• C)there is a recessionary gap.
• D)there is over-full employment.
• E)prices are sure to rise.

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Definitions:

Big-8 Accounting Firm

Refers to the top eight accounting firms in the United States that dominated the industry until mergers and scandals reduced the number to the Big Four.

Expected Value

The average outcome of a random event when considering all possible outcomes and their probabilities.

Probability

The measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Von Neumann-Morgenstern Utility Function

A utility function theory based on expected utility, fundamental in making rational decisions under uncertainty, emphasizing outcomes' probabilities.