Figure 21-8 -Refer to Figure 21-8. You Have $300 to Spend on to Spend

question 513

Multiple Choice

Figure 21-8
-Refer to Figure 21-8. You have $300 to spend on good X and good Y. If good X costs $30 and good Y costs $50, your budget constraint is

• A)AB.
• B)BC.
• C)CD.
• D)DE.

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Definitions:

Inflationary Gap

A situation where the demand for goods exceeds supply at the current price levels, leading to an increase in prices and inflation.

Equilibrium GDP

The level of Gross Domestic Product where the aggregate supply equals aggregate demand within an economy, leading to a stable economic condition.

Full Employment GDP

The level of GDP produced when the economy is utilizing all available resources, including labor, at the maximum sustainable rate without causing inflation.

Recessionary Gap

A situation where the real Gross Domestic Product (GDP) is lower than the potential GDP, indicating underutilization of resources.