Within the Framework of the Keynesian Cross Model, If an Economy

question 53

Multiple Choice

Within the framework of the Keynesian Cross model, if an economy is operating at a real GDP less than full-employment real GDP:

• A) a recessionary gap exists
• B) an inflationary gap exists
• C) aggregate expenditures will rise
• D) the general level of prices will rise

---

Definitions:

Option Contract

An agreement whereby the offeree gives the offeror a piece of consideration in exchange for the offeror’s agreement to hold the offer open for the specified period of time.

Valid Promise

A pledge or commitment within a contract that meets all legal requirements, making it enforceable by law.

Option Contract

An agreement providing the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price within a specific timeframe.

Consideration

An item of worth traded between individuals in a contract to render the agreement enforceable by law.