If the Price Level in an Economy Rises and Its

question 126

Multiple Choice

If the price level in an economy rises and its output level decreases as it gravitates toward its potential GDP,then:

• A)a policy to manipulate the aggregate supply is being used.
• B)an active approach to correcting a recessionary gap is being used.
• C)an active approach to correcting an expansionary gap is being used.
• D)a passive approach to correcting a recessionary gap is being used.
• E)a passive approach to correcting an expansionary gap is being used.

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Definitions:

Cash Flow

The net amount of cash and cash-equivalents being transferred into and out of a business.

Operating Activities

Activities that relate to the primary, day-to-day operations of a business, such as selling products or providing services.

Prepaid Expenses

Assets on the balance sheet representing services or goods paid for upfront but not yet consumed.

Indirect Method

A technique used in cash flow statement preparation, adjusting net income for changes in non-cash accounts to arrive at operating cash flow.