If Equilibrium GDP Is $500 Billion Greater Than Full Employment

question 329

Multiple Choice

If equilibrium GDP is $500 billion greater than full employment GDP and the multiplier is 2.5,there is an inflationary gap of

• A)$100 billion.
• B)$200 billion.
• C)$250 billion.
• D)$500 billion.
• E)This is impossible to find with the information given.

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Definitions:

Constant Marginal Cost

A situation where the cost of producing one additional unit of a good remains the same regardless of the level of production.

Cournot Duopolists

Firms in a duopoly market structure who compete on the basis of quantity produced, as modeled by Antoine Cournot.

Demand Curve

A graph depicting the relationship between the quantity of a good that consumers are willing to buy and the price of the good.

Total Costs

The total of all expenses involved in creating goods or services, encompassing both fixed and variable costs.