The Existence of an Inflationary Gap Should Cause

question 75

Multiple Choice

The existence of an inflationary gap should cause

• A)wages to fall.
• B)prices to fall.
• C)unemployment to rise.
• D)net exports to rise.

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Definitions:

Units of Labor

Quantifiable measurements of labor force input, such as hours worked or number of workers, used in economic analysis to assess productivity or costs.

Diminishing Returns

A principle stating that as additional units of a variable resource are added to a fixed resource, the marginal product of the variable resource will eventually decrease.

Fixed Input

A production factor that remains unchanged regardless of the level of output in the short run.