If Potential Output Equals 8,000 and Short-Run Equilibrium Output Equals

question 81

Multiple Choice

If potential output equals 8,000 and short-run equilibrium output equals 8,500, there is a(n) ________ gap and the Federal Reserve must ________ real interest rates in order to close the gap.

• A)recessionary; raise
• B)recessionary; reduce
• C)recessionary; not change
• D)expansionary; raise

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Definitions:

Average Inventory

It is the mean value of inventory within a specific period, calculated to help understand inventory levels and manage them effectively.

Cash Budget

A cash budget is a financial plan that estimates cash inflows and outflows over a specified period, often used by businesses to manage liquidity.

Payments Lag

Payments lag refers to the delay between the time when an expense is incurred and the time when the payment is actually made.

Cumulative Cash

The total amount of cash generated or accumulated over a period of time, often used in the context of a company's cash flow.