As a Contractionary Gap Is Closed in the Long Run

question 23

Multiple Choice

As a contractionary gap is closed in the long run,

• A)the inflation rate increases and unemployment decreases
• B)output increases and the price level decreases
• C)both output and the price level increase
• D)both output and the price level decrease
• E)the inflation rate decreases and unemployment increases

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Definitions:

Face Value

The nominal value printed on a bond, currency, ticket, or other financial instrument, representing its legal value rather than market value.

Market Price

The present rate at which a service or asset is available for purchase or sale.

Investment Option

A financial vehicle or asset that individuals can allocate capital towards with the expectation of a future return.

Return

The profit or loss derived from an investment or transaction.