The Table Below Shows Data for Five Economies of Similar

question 105

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.How is the adjustment asymmetry demonstrated when comparing Economy A to Economy E?

• A)The size of the output gap is the same in Economies A and E,but wages are rising in A and falling in E.
• B)The output gap is larger in Economy A,yet wages are changing more slowly.
• C)The output gap is much larger in Economy E,so wages are changing at a faster rate.
• D)The size of the output gap is the same in Economies A and E but wages are falling more slowly in A than they are rising in E.
• E)There is insufficient data with which to observe the adjustment asymmetry.

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Definitions:

Incremental Analysis

The process of comparing the expected costs and benefits of alternative decisions, focusing on the differences between them.

Net Income

The profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Unprofitable Segment

A division or part of a company that does not generate profit and may result in a financial loss for the company.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new factory or investing in new equipment, worthwhile.