When an Economy's Actual Output Is Greater Than Its Potential

question 161

Multiple Choice

When an economy's actual output is greater than its potential at some point in time, we say that it is experiencing:

• A) a positive output gap.
• B) a negative output gap.
• C) inflation.
• D) deflation.

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Definitions:

Consumer Surplus

The gap between what a consumer is prepared to spend on a good or service and the price they actually end up paying.

Market Equilibrium

A condition or state in an economy where supply and demand are equal, leading to stable prices and quantities.

Units Bought

The quantity of a product that consumers purchase at a given price.

Tax Imposed

A financial charge or other levy instituted by a government on an individual or an entity to raise revenue for public purposes.