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

question 88

Multiple Choice

Using the aggregate expenditure-output model, assume the aggregate expenditures (AE) line is above 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:

Interest

The cost of borrowing money, typically expressed as an annual percentage of the loan or deposit amount.

Unrealized Holding Gain

The increase in value of an asset that is still held by an entity and has not been sold for a profit.

Trading Security

A financial asset that a company holds primarily for the purpose of selling it in the short term to profit from price changes.

Available-For-Sale Security

A financial asset that is neither classified as held-to-maturity nor held for trading, and the investor intends to sell if needed before its maturity or holding period ends.