The Figure Shows Planned Aggregate Expenditure and Output for an Economy

question 42

Multiple Choice

The figure shows planned aggregate expenditure and output for an economy. Suppose that the economy's output is Y₂. This level of GDP would be considered:

• A) inflationary.
• B) recessionary.
• C) a long-run level of output.
• D) unsustainable over time.

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Definitions:

Optimal

Referring to the most favorable or advantageous condition or level.

Optimal Risky Portfolio

A portfolio composition that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Risk-Free Rate

The rate of return on an investment with zero risk, typically represented by government bonds.

Expected Return

The average return an investor anticipates receiving from an investment, taking into account all possible outcomes.