When the Economy Is Operating at Potential GDP,the Rate of Inflation

question 23

Multiple Choice

When the economy is operating at potential GDP,the rate of inflation is

• A) rising.
• B) neither rising nor falling.
• C) falling.
• D) causing aggregate demand to fall while supply rises.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating the amount contributing to covering fixed costs and profit.

Variable Cost

A cost that changes in proportion to the level of output or activity in a business.

Special Discounted Price

A reduced price offered on goods or services, usually as part of a promotional deal or to certain groups of customers.

Idle Capacity

The portion of a company’s resources or assets that are not being used to their full potential, often leading to inefficiencies.