When an Economy Is Not Producing at Its Potential Output

question 48

Multiple Choice

When an economy is not producing at its potential output, which of the following is likely?

• A) The actual price level is unexpected.
• 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 economy is producing its minimum sustainable output.

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Definitions:

Captive Finance Company

A finance company that is wholly owned by a parent company, primarily for the purpose of providing financing to the customers of the parent company.

Credit Function

The role of extending credit to consumers or businesses, enabling the purchase of goods or services before payment.

Controlled Disbursements

A cash management technique where companies strategically issue payments to regulate their cash outflows and maximize the available cash.

Junior Subsidiary

A subsidiary that ranks below other subsidiaries in claim on assets and earnings.