The Amount by Which the Equilibrium Level of Real GDP

question 5

Multiple Choice

The amount by which the equilibrium level of real GDP is less than the long-run equilibrium level as given by LRAS is referred to as

• A)a contractionary gap.
• B)economic growth.
• C)the amount by which taxes should be increased in order to put the brakes on run-away inflation.
• D)an inflationary gap.

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Definitions:

State University

A publicly funded university that is primarily supported by a state government.

Barrier to Entry

Factors that prevent or hinder companies from entering into a specific market or industry.

Allocative Efficiency

A state of resource allocation where every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Market Power

The ability of a firm or group of firms to manipulate the price or supply of a good or service in the market, often by limiting availability or by altering consumer demand through control of significant portions of the market.