If We Observe an Economy Adjusting to Potential GDP as Prices

question 40

Multiple Choice

If we observe an economy adjusting to potential GDP as prices fall and real output increases,we can conclude that _____.

• A)the economy was experiencing an expansionary gap
• B)there is a labor surplus
• C)the economy was experiencing a recessionary gap
• D)self-correction is not the process that is occurring
• E)there are widespread labor shortages

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Definitions:

Petty Cash

A small amount of cash on hand used for minor or incidental expenses within a business.

Normal Balance

The side (debit or credit) of an account that is expected to have a greater balance based on standard accounting practices.

Asset

Resources owned or controlled by a business or individual that are expected to produce economic value or future benefits.

Petty Cash Fund

A small amount of cash kept on hand by a business for making immediate payments for small, incidental expenses.