If the Economy Is in Equilibrium at $400 Billion of GDP

question 22

Multiple Choice

If the economy is in equilibrium at $400 billion of GDP and the full-employment GDP is $500 billion,

• A)real and nominal GDP will both increase.
• B)GDP will remain at $400 billion unless aggregate expenditures change.
• C)real GDP will increase, but nominal GDP will decrease.
• D)the price level will increase.

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Definitions:

Future Value

The value of an investment at a specified date in the future that accounts for a specified rate of interest or rate of return.

Interest Rate

The amount charged by a lender to a borrower for the use of assets expressed as a percentage of the principal.

Trust Fund

A legal entity set up to hold property or assets for the benefit of another party, often managed by a trustee.

Rate of Return

The upward or downward adjustment in an investment's value through a defined span, represented as a fraction of the investment's initial expense.