Suppose an Economy That Has Been Operating at Full Employment

question 28

Multiple Choice

Suppose an economy that has been operating at full employment has been experiencing 4 percent annual inflation. If output later falls to a level that is less than potential output, prices generally will begin to rise at

• A) a rate of 4 percent.
• B) a rate greater than 4 percent.
• C) a rate less than 4 percent.
• D) a rate of 0 percent.

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Definitions:

Total Utility

The overall pleasure gained from utilizing a certain quantity of goods or services.

Marginal Utility

The change in satisfaction or utility obtained by consuming an additional unit of a good or service.

Beers

Alcoholic beverages made from grain, water, hops, and yeast, typically fermented and varying widely in flavor, strength, and type.

Oysters

Marine mollusks that live in marine or brackish habitats, known for their edible, calcium-rich shells and being a delicacy in many parts of the world.