Which of the Following Situations Is One in Which the Bank

question 224

Multiple Choice

Which of the following situations is one in which the Bank of Canada will potentially pursue expansionary monetary policy?

• A)Potential GDP is forecasted to be higher than equilibrium GDP.
• B)Potential GDP is forecasted to be lower than equilibrium GDP.
• C)Aggregate demand is growing too fast to keep the economy at full employment.
• D)Aggregate demand is growing too slowly and the economy is in danger of producing GDP above potential GDP.
• E)The unemployment rate has fallen below its natural rate.

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Definitions:

Unit Variable Cost

The cost associated with producing one additional unit of a product, excluding fixed costs.

Fixed Cost

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Profit

The difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services.

Direct Materials Cost

The expense associated with raw materials directly incorporated into a finished product.