The Shortfall Between Actual Real GDP and Potential GDP

question 194

Multiple Choice

The shortfall between actual real GDP and potential GDP

• A)decreases as the unemployment rate rises.
• B)increases as the unemployment rate rises.
• C)increases as the employment rate rises.
• D)decreases as the labor force increases.

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Definitions:

Competitive Firm

A company operating in a market where there are many buyers and sellers, none of which can influence the market price.

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced.

Minimum AVC Point

The level of output at which a firm's average variable cost (AVC) is minimized.

Purely Competitive

A market scenario where numerous producers and consumers participate, making the individual impact on price negligible.