Use the Following to Answer Questions

question 49

Multiple Choice

Use the following to answer questions :
Figure: Fiscal Policy Choices
-(Figure: Fiscal Policy Choices) Look at the figure Fiscal Policy Choices. In panel (a) , the economy is initially at output level Y₁ and there is:

• A)an inflationary gap.
• B)a recessionary gap.
• C)equilibrium at full employment.
• D)no gap.

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Definitions:

Marginal Cost Curve

A graph that shows the cost of producing one more unit of a good or service at each level of production.

Average Variable Cost

The cost per unit of varying inputs in the production process, calculated by dividing total variable costs by the quantity of output produced.

Economic Profits

Profits calculated by subtracting total explicit and implicit costs from total revenues; measures the excess over both the opportunity cost of capital and the wages that business owners could have earned elsewhere.

Marginal Cost

The escalation in total expenses incurred from the production of an additional unit of a product or service.