Figure 10-4 ​

question 211

Multiple Choice

Figure 10-4
​
-A recessionary gap exists when

• A)real GDP exceeds nominal GDP.
• B)nominal GDP exceeds real GDP.
• C)real GDP exceeds potential GDP.
• D)potential GDP exceeds real GDP.

---

Definitions:

Moral Hazard

The situation where one party is more likely to take risks because they do not bear the full consequences of those risks.

Hidden Action

A situation in contract theory and economics where one party's action is not observed or cannot be monitored by another, potentially leading to moral hazard.

Moral Hazard

The situation in which one party engages in risky behavior knowing that it is protected against the consequences, usually due to a contract or agreement.

Criminal Actions

Activities that are punishable by law, typically involving harm to individuals or the society at large.