-Refer to Figure 15.1. at Point B

question 95

Multiple Choice

-Refer to Figure 15.1. At point b

• A) GDP is above potential output.
• B) GDP is below potential output.
• C) unemployment is above the natural rate.
• D) the economy is in long-run equilibrium.

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Definitions:

Subsidizing Production

Financial assistance provided by the government or other institutions to reduce the cost of producing goods or services and encourage increased output.

Negative Externalities

A situation where a third party suffers from a decision or action made by others, typically not reflected in the market price.

Positive Externalities

Benefits enjoyed by third-party individuals or the society at large, which result from an economic activity but are not reflected in the market prices.

Negative Externality

An external effect of a product or activity that imposes a negative impact on a third party or the environment.