When an Economy Operates at Its Long-Run Potential Output Level

question 166

Multiple Choice

When an economy operates at its long-run potential output level,

• A) aggregate demand will exceed aggregate supply in the goods and services market.
• B) unemployment will decline to an abnormally low rate that cannot be sustained in the long run.
• C) the actual rate of unemployment will exceed the natural rate of unemployment.
• D) the natural and actual rates of unemployment will be equal.

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Definitions:

APR

The Annual Percentage Rate, which reflects the cost of borrowing on a yearly basis and includes interest and other charges.

Mortgage

A loan secured by real estate property, commonly used to purchase a home.

Prepaid Interest

Interest starts accruing (building) at the beginning of each month and continues throughout the month; prepaid interest at the closing is the amount of mortgage interest due to cover the time from the closing date to when the first mortgage payment is due.

Down Payment

The upfront money applied to a purchase that is made using a loan (credit).