In Macroland, Potential Output Equals $100 Trillion and the Natural

question 41

Multiple Choice

In Macroland, potential output equals $100 trillion and the natural rate of unemployment is 4 percent. If the actual unemployment rate is 3 percent, then the output gap equals:

• A)−1 percent.
• B)−2 percent.
• C)1 percent.
• D)2 percent.

---

Definitions:

Insanity Defense

A legal defense used in criminal trials where the defendant claims that they should not be held responsible for their actions due to mental illness.

Intention to Commit

A plan or decision to engage in a specific action or behavior.

Irresistible Impulse Rule

A legal defense theory stating that a defendant was compelled to commit a crime due to an overwhelming impulse that they could not resist, despite understanding the nature of the act.

Diminished Capacity

A legal defense asserting that an individual's mental state, though not completely impaired, was significantly disturbed at the time of the crime, affecting their judgment or intentions.