For an Economy Starting at Potential Output, a Decrease in Planned

question 95

Multiple Choice

For an economy starting at potential output, a decrease in planned investment in the short run results in a(n) :

• A)expansionary output gap.
• B)recessionary output gap.
• C)increase in potential output.
• D)decrease in potential output.

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Definitions:

Complementary Resources

Assets or inputs that enhance the value or effectiveness when used in conjunction with another resource.

Least-costly Combination

In production, using the mix of resources that minimizes cost while producing a given level of output.

Marginal Resource Cost

Marginal resource cost is the additional cost incurred by producing one more unit of a good or service.

Marginal Revenue Product

The extra income produced by the use of an additional unit of a resource, like labor or capital.