When an Economy Is Producing Its Potential Output, Which of the Following

question 97

Multiple Choice

When an economy is producing its potential output, which of the following is true?

• A) The price level is higher than that expected by workers.
• B) The nominal wage is equal to the real wage.
• C) The unemployment rate is about 14 percent.
• D) The economy is producing its maximum sustainable output.
• E) The actual price level is less than the expected price level.

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Definitions:

Annual Percentage Rates

The yearly percentage charged for taking out a loan or gained from an investment, including all fees or extra expenses.

Quoted Rates

The publicly listed interest rates or prices for financial instruments or bank deposits.

Effective Annual Rate

The interest rate on an investment or loan, annualized for compounding over a given period more than once a year.

APR

Annual Percentage Rate; a measure of the cost of credit, expressed as a yearly interest rate.