The Economy Is at Potential GDP When People Correctly Anticipate

question 68

Multiple Choice

The economy is at potential GDP when people correctly anticipate an increase in government expenditure on goods and services. If the money wage rate adjusts immediately, then

• A) real GDP and the price level will increase in the short run, but the real wage rate will fall.
• B) real GDP remains at potential GDP.
• C) real GDP, the price level, and the real wage rate all increase in the short run.
• D) real GDP remains at potential GDP, there is no change in the price level, and the real wage rate rises in the short run.

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Definitions:

Data

Facts and statistics collected together for analysis.

Standard Deviation

An indicator used to determine the extent of variation or dissimilarity within a group of values.

Data

Material compiled for consulting or investigative purposes.

Sum of Squared Scores

A calculation in statistics that measures the dispersion of a set of values by squaring each distance from the mean and summing them up, often used in variance and standard deviation calculations.