If Real GDP Exceeds Potential GDP,to Move the Economy to Potential

question 22

Multiple Choice

If real GDP exceeds potential GDP,to move the economy to potential GDP the Fed

• A)raises the federal funds rate to increase potential GDP but not real GDP.
• B)lowers the federal funds rate to decrease real GDP but not potential GDP.
• C)raises the federal funds rate to decrease real GDP but not potential GDP.
• D)lowers the federal funds rate to increase potential GDP but not real GDP.
• E)raises the federal funds rate to decrease both real GDP and potential GDP.

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Definitions:

Contribution Margin Ratio

The ratio of Contribution Margin to Sales Revenue, measuring the percentage of each sales dollar available to cover fixed costs and profit.

Fixed Costs

Unvarying costs that do not fluctuate with changes in production or sales levels, such as office rent, staff wages, and insurance coverage.

Break-Even Point

The point where the amount produced or sold matches the overall expenses, leading to neither a profit nor a loss.

Contribution Margin

A profitability metric that calculates the amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.