If the Price Level in an Economy Rises and Its

question 126

Multiple Choice

If the price level in an economy rises and its output level decreases as it gravitates toward its potential GDP,then:

• A)a policy to manipulate the aggregate supply is being used.
• B)an active approach to correcting a recessionary gap is being used.
• C)an active approach to correcting an expansionary gap is being used.
• D)a passive approach to correcting a recessionary gap is being used.
• E)a passive approach to correcting an expansionary gap is being used.

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Definitions:

Differentiated Products

Goods or services that are distinct from others based on quality, features, and branding to compete in the market.

Industry Entry

The process by which new companies or businesses begin to compete in an existing market.

Oligopoly

A market structure characterized by a few companies controlling the majority of market share, which can lead to limited competition.

Perfect Competition

A market structure characterized by many buyers and sellers, homogeneous products, and free entry and exit, leading to an efficient allocation of resources.