How Is It Possible for the Economy to Have an Inflationary

question 119

Multiple Choice

How is it possible for the economy to have an inflationary gap?

• A)Equilibrium is at a GDP level below full employment.
• B)Equilibrium is at a GDP level equal to full employment.
• C)Equilibrium is at a GDP level above full employment.
• D)GDP is rising at full employment.
• E)GDP is falling at full employment.

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Definitions:

Constitutional Amendment

A formal change or addition proposed or made to a constitution, which alters its content and legal ordering.

Balanced Budget

A financial plan whereby revenues and expenditures are equal, resulting in no deficit for the given period.

Business Cycle

The fluctuations in economic activity that an economy experiences over a period of time, typically characterized by periods of boom and recession.

Balanced Budget Rule

A fiscal policy regulation requiring that a government's spending does not exceed its income in a given period.