If Short-Run Equilibrium Output Equals 50,000 and Potential Output (Y*)equals

question 110

Multiple Choice

If short-run equilibrium output equals 50,000 and potential output (Y*) equals 45,000, then this economy has a(n) ________ gap that can be closed by ________.

• A)expansionary; decreasing taxes
• B)expansionary; increasing transfer payments
• C)expansionary; decreasing government purchases
• D)recessionary; increasing government purchases

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Definitions:

Coupon Rate

The annual interest rate paid by a bond relative to its face value, representing the yield an investor expects to earn if the bond is held to maturity.

Yield

It refers to the earnings generated and realized on an investment over a particular period, expressed as a percentage.

Duration

A measure of the average life of a bond, defined as the weighted average of the times until each payment is made, with weights proportional to the present value of the payment.

Bond

A fixed income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental.