The Real Output of the Economy Under Conditions of Full

question 223

Multiple Choice

The real output of the economy under conditions of full employment

• A) is long-run aggregate supply.
• B) is long-run aggregate demand.
• C) happens only when there is no inflation.
• D) is determined by the real-balance effect.

---

Definitions:

Nominal Interest Rate

The percentage increase in money you pay the lender for the use of the money you borrowed, not adjusted for inflation.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the real cost of borrowing and the real yield on savings.

Purchasing Power

The value of a currency expressed in terms of the quantity of goods or services that one unit of money can buy, often influenced by inflation.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, often used as an indicator of inflation.