If There Is an Inflationary Gap,then a 45-Degree Line Exceeds

question 135

True/False

If there is an inflationary gap,then a 45-degree line exceeds the aggregate expenditure curve at the full-employment level of income.
The 45-degree line exceeds the aggregate expenditure when there is a recessionary gap and spending would be insufficient to purchase all output.

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Definitions:

Allowance Method

An accounting technique used to estimate and account for bad debts where the company anticipates a certain percentage of accounts receivable will be uncollectible.

Bad Account

An account receivable that has been deemed uncollectible and is written off as a loss.

Pre-Reconciliation Cash Balance

The cash balance reported in accounting records before adjustments are made for reconciling items in a bank reconciliation.

Outstanding Checks

Checks that have been written and recorded in a company's financial ledger but have not yet been cashed or cleared by the bank.