Suppose an Economy Exhibits a Large Unexpected Increase in Productivity

question 24

Multiple Choice

Suppose an economy exhibits a large unexpected increase in productivity growth that lasts for a decade.However,monetary policymakers are slow to recognize that the change is to potential,not current,output,and interpret the increase in output as a boom that leads current to exceed potential output.In this scenario,policymakers believe that __________ pressures are building and incorrectly respond by __________ interest rates,sending the economy into a(n) __________ gap.

• A)inflationary;raising;recessionary
• B)inflationary;reducing;recessionary
• C)recessionary;raising;expansionary
• D)recessionary;reducing;recessionary
• E)Not enough information is given.

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Definitions:

Total Assets

The sum of all resources owned by a company, valued in monetary terms, including both current and non-current assets.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity and operational efficiency of the business.

Industry Figures

Statistical data or benchmarks representing the performance, trends, and norms within a specific industry.

Vertical Analysis

Vertical analysis is a financial statement analysis technique where each entry in the main financial statements is represented as a proportion of a selected item, providing insights into the structure of the statements.