When There Is an Inflationary Gap in the Economy,what Is

question 168

Multiple Choice

When there is an inflationary gap in the economy,what is occurring to real output in relation to the natural level of output?

• A)Real output exceeds the natural level of output.
• B)Real output is equal to the natural level of output.
• C)Real output may exceed or may be less than the natural level of output.
• D)Real output is less than the natural level of output.

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Definitions:

Economic Profit

The difference between a firm’s total revenues and its total costs, including both explicit and implicit costs, representing the actual financial gain.

Accounting Profit

The total revenue of a business minus its explicit costs, reflecting the financial gain as recorded in the financial statements.

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, perfect information, and free entry and exit.

Elastic

A term used to describe a good's demand sensitivity to changes in price; highly elastic means demand changes significantly with price changes.