Using the Aggregate Expenditure-Output Model, Assume the Aggregate Expenditures (AE)

question 97

Multiple Choice

Using the aggregate expenditure-output model, assume the aggregate expenditures (AE) line is below the 45-degree line at full-employment GDP. This vertical distance is called a(n) :

• A) inflationary gap.
• B) recessionary gap.
• C) negative GDP gap.
• D) marginal propensity to consume gap.

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Definitions:

Private Property Rights

Legal rights that grant individuals or entities the ability to own, use, and control personal or real property.

Legal System

The framework of rules, laws, and regulations established to maintain order and protect persons and property.

Market Efficiency

The extent to which market prices fully reflect all available information and adjust to new information swiftly.

Rent Controls

Government-imposed restrictions on the maximum rent charges, intended to keep housing affordable.