An Economy Is at Full Employment

question 63

Multiple Choice

An economy is at full employment. Which of the following events can create a recessionary gap?

• A)A decrease in money wages
• B)A decrease in the quantity of capital
• C)An increase in taxes
• D)An increase in foreign income

---

Definitions:

Excess Demand

A market condition where the quantity demanded of a good or service exceeds the quantity supplied at a given price, leading to shortages.

Good Increases

Refers to a situation where the quantity or quality of goods available in a market or economy grows.

Excess Demand

Occurs when the quantity demanded of a product significantly exceeds its quantity supplied, often leading to a shortage.

Equilibrium Price

The price at which the quantity of a good or service supplied matches the quantity demanded, resulting in market stability.