If Potential Output Equals $5 Billion and Actual Output Equals

question 46

Multiple Choice

If potential output equals $5 billion and actual output equals $4.5 billion,then this economy has a(n)

• A) budget deficit.
• B) trade deficit.
• C) expansionary gap.
• D) recessionary gap.
• E) value-added gap.

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Definitions:

Stock Index

A statistical measure that reflects the composite value of a basket of stocks, representing a particular market or a segment of it.

Risk-Free Rate

The theoretical return on investment with zero risk, often represented by the yield on government bonds.

Anticipated Dividend

The forecasted distribution of earnings to shareholders indicated by a company's management.

Futures Contract

A formal agreement, set by law, to purchase or sell an item at an agreed price on a certain date in the future.