If an Economy Has Been Operating Below Its Potential Output

question 153

Multiple Choice

If an economy has been operating below its potential output level,

• A) frictional unemployment is too high
• B) more individuals should begin entering the labor force
• C) the government should create more jobs
• D) unemployment is likely rising.
• E) the production possibilities frontier will shift

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Definitions:

Exponential Decay

A process in which the value of a quantity decreases at a rate proportional to its current value.

Compound Interest

The addition of interest to the principal sum of a loan or deposit, where the interest that has been added also earns interest.

Exponential Growth

Exponential growth describes a process that increases in quantity at a consistent rate relative to its current value, often seen in populations or investments.

Arithmetic Operations

Basic mathematical operations which include addition, subtraction, multiplication, and division.