The Table Below Shows Data for Five Economies of Similar

question 25

Multiple Choice

The table below shows data for five economies of similar size.Real GDP is measured in billions of dollars.Assume that potential output for each economy is $340 billion.
TABLE 24-1
-Refer to Table 24-1.Which of the following statements explains why wages are rising in Economy E?

• A)The inflationary gap generates lower profits for firms because workers are demanding higher wages.
• B)The inflationary gap generates excess demand for labour,which causes wages to rise.
• C)The aggregate supply curve is shifting to the right,which is causing wages to rise.
• D)The aggregate demand curve is shifting to the right,causing wages to rise.
• E)Potential output is rising,putting upward pressure on wages.

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Definitions:

Quantity Demanded

The amount of a good or service that consumers are willing and able to purchase at a given price.

Demand Schedule

A table that shows the quantity of a good or service that consumers are willing and able to purchase at different prices.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, resulting in market balance.

Surplus

An excess of production or supply over demand, often leading to a decrease in prices.