When an Expansionary Gap Exists, Actual Output ________ Potential Output

question 96

Multiple Choice

When an expansionary gap exists, actual output ________ potential output and the rate of inflation will tend to ________.

• A)exceeds; increase
• B)exceeds; decrease
• C)is less than; decrease
• D)is less than; increase

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Definitions:

United States

A nation in North America that encompasses 50 states, a federal district, five significant self-governing territories, and a collection of possessions.

Human Capital

The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community.

Profit-Maximizing Entrepreneur

An entrepreneur who aims to achieve the highest possible profit through business operations.

Interest Rate

The percentage charged by lenders to borrowers for the use of money, or the rate earned on investments, reflecting the cost of borrowing or the yield on investments.