As an Expansionary Gap Is Closed in the Long Run

question 170

Multiple Choice

As an expansionary gap is closed in the long run,

• A)nominal and real GDP decline
• B)nominal and real GDP increase
• C)nominal GDP increases but real GDP declines
• D)nominal GDP declines but real GDP increases
• E)real GDP declines,but nominal GDP can increase,decrease,or remain the same

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, frequently appearing as a line item on the income statement.

Market Rate

The prevailing interest rate available in the marketplace for securities or loans, varying with the demand, supply, and risk.

Semiannual Interest Payment

Interest payments made twice a year on a loan or bond.

Market Rate

The current price or interest rate at which an asset, or service can be bought or sold in a given market.