When the Economy Is at Its Potential Output Level,which of the Following

question 164

Multiple Choice

When the economy is at its potential output level,which of the following is not true?

• A)Firms' and workers' expectations about the price level are realized.
• B)The nominal wage is a very poor measure of the expected real wage.
• C)The unemployment rate is about 4 to 6 percent.
• D)The economy is producing its maximum sustainable output.
• E)The actual price level equals the expected price level.

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Definitions:

Monetary Policy

Monetary policy involves the management of a nation's money supply and interest rates by the central bank to control inflation, stabilize currency, and achieve economic growth.

Fiscal Policy

Government policy that attempts to influence the economy through changes in government spending and taxes.

Aggregate Demand

Aggregate Demand is the total demand for all goods and services within an economy at a given overall price level and in a given time period.

Money Supply

The global sum of money available in an economy at a particular instance, including all forms of cash, coins, and the contents of checking and savings accounts.