If the Output Gap Is Constant at Minus 2 and the Inflation

question 78

Multiple Choice

If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent,then next period's short-run aggregate supply curve might be ________.

• A)π = 5 - 0.5 (13 - 15)
• B)π = 5 + 0.5 (13 - 15)
• C)π = 4 + 0.5 (13 - 15)
• D)π = 5 + 2 (11 - 15)
• E)none of the above

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Definitions:

Straight-Line Depreciation

A method of depreciation where an asset's cost is evenly spread across its estimated useful life.

Net Present Value

A financial metric that evaluates the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows over a period.

Capital Budgeting

The strategy of organizing and overseeing a firm's extended investments in significant projects or assets.

Cash Flow

The aggregate measure of capital movement into and from a business, significantly affecting its solvency.