In a Self-Correcting Model of the Economy,expansionary Gaps Are Eventually

question 54

Multiple Choice

In a self-correcting model of the economy,expansionary gaps are eventually eliminated by

• A) rising inflation and rising real interest rates.
• B) falling inflation and falling real interest rates.
• C) increasing potential output.
• D) decreasing potential output.
• E) government policy.

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Definitions:

Net Loss

The amount by which total expenses exceed total revenues for a business over a specified period, indicating financial performance.

Nominal Accounts

Accounts that are closed at the end of each accounting period, including revenue, expense, and withdrawal accounts.

Temporary Accounts

Accounts used to track transactions in a single accounting period, which are closed and transferred to permanent accounts at the end of the period.

Income Summary

An account used in the closing process that summarizes the revenue and expenses of an accounting period to determine the net income or loss.