In Which of the Following Cases Is the Output Gap

question 61

Multiple Choice

In which of the following cases is the output gap zero?

• A) When consumer con?dence declines due to bad economic performance.
• B) When the economy operates on its production possibility frontier.
• C) When unemployment increases due to an increase in real wages.
• D) When in?ation in the economy is equal to its target level.

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Definitions:

Cement

A binding material, often used in construction, made by grinding calcined limestone and clay to a fine powder which hardens when mixed with water.

Quarries

Open-pit mining operations where stone, limestone, marble, or other materials are excavated for building and decorative uses.

Mudcracks

Cracks in clay-rich soil or sediment that occur as it dries, typically indicating past water presence.

Bedding

The formation of parallel layers of sediment as they accumulate over time, indicating successive periods of deposition.