For Policymakers, the Problem with a Recessionary Gap Is ________

question 72

Multiple Choice

For policymakers, the problem with a recessionary gap is ________ and the problem with an expansionary gap is ________.

• A)a tendency for inflation to increase; wasted resources
• B)wasted resources; a tendency for inflation to increase
• C)an increase in cyclical unemployment; an increase in structural unemployment
• D)an increase in structural unemployment; an increase in cyclical unemployment

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Definitions:

Equilibrium Price

The equilibrium price where the supply of goods matches the demand for goods in the market.

Binding Price Ceiling

A legally established maximum price for a good or service that is lower than the equilibrium price, leading to shortages.

Price Floor

A government or regulatory-imposed minimum price below which a good or service cannot legally be sold, intended to protect producers.

Binding Price Floor

A government-imposed price control that sets a minimum price for a good or service, which is above the equilibrium price, causing a surplus.