When the Economy Is Creating Less Output Than Its Potential

question 30

Multiple Choice

When the economy is creating less output than its potential, it means:

• A) some resources are unemployed.
• B) the economy is expanding.
• C) contractionary policy needs to be enacted.
• D) the government will reduce its spending.

---

Definitions:

Dividends

A portion of a company's earnings that is paid to shareholders as a distribution of profits.

Balance Sheet

A report detailing a firm's assets, liabilities, and owners' equity at a certain moment.

Retained Earnings

The portion of a company's profit that is held or retained and not paid out as dividends to shareholders, often used for reinvestment in the business or to pay down debt.

Common Stock

Equity ownership in a corporation, with rights to dividends and voting privileges in corporate matters.