In Macroland,potential Output Equals $100 Billion and the Natural Rate

question 11

Multiple Choice

In Macroland,potential output equals $100 billion and the natural rate of unemployment is 5%.If the actual unemployment rate is 3%,then the output gap equals

• A) - $4 billion.
• B) - $2 billion.
• C) - $1 billion.
• D) $2 billion.
• E) $4 billion.

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Definitions:

Standard Rate

A predetermined cost or price used as a benchmark for evaluating the efficiency or effectiveness of operations.

Spending Variance

The difference between the actual amount spent and the budgeted amount for a specific period, indicating under or overspending.

Variable Overhead

Costs that change with the level of production or service activity.

Activity Level

A metric indicating the volume or intensity of operations in a company, affecting its costs and resources.