Suppose an Economy Is Operating at Its Maximum Sustainable Output

question 67

Multiple Choice

Suppose an economy is operating at its maximum sustainable output rate. Neither recession nor economic boom are present. Which of the following would be true?

• A) The economy would be considered at full employment.
• B) Actual GDP would exceed potential GDP.
• C) Actual unemployment will be less than the natural rate of unemployment.
• D) One hundred percent of the labor force is employed.

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Definitions:

Incentive Bonuses

Additional compensation given to employees as a form of encouragement to exceed performance goals.

Stipulated Benchmark

A predefined standard against which the performance of an investment or fund is measured.

Portfolio Assets

All the individual investments held within a portfolio, including stocks, bonds, cash, and other securities.

Monthly Excess Returns

The return on an investment minus the return on a risk-free investment (such as Treasury bills), measured on a monthly basis.