When the Current State of the Economy Is Such That

question 6

Multiple Choice

When the current state of the economy is such that Real GDP is less than Natural Real GDP,the economy is in a(n) ____________________ gap.In this situation,the (actual) unemployment rate is ___________ than the natural unemployment rate,and there is a ________________ in the labor market.

• A) recessionary; greater; shortage
• B) inflationary; less; shortage
• C) inflationary; greater; surplus
• D) recessionary; greater; surplus
• E) recessionary; less; shortage

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Definitions:

Economic Profits

Profits exceeding the opportunity costs of a venture or investment, accounting for both explicit and implicit costs.

Normal Profits

The level of profit necessary to keep a firm in an industry, equating to the opportunity cost of capital and entrepreneurship.

Marginal Cost

The financial commitment needed for producing an extra unit of a good or service.

Marginal Revenue

The addition to total revenue resulting from the sale of one more unit of a product or service.