As a Contractionary Gap Is Closed in the Long Run

question 23

Multiple Choice

As a contractionary gap is closed in the long run,

• A)the inflation rate increases and unemployment decreases
• B)output increases and the price level decreases
• C)both output and the price level increase
• D)both output and the price level decrease
• E)the inflation rate decreases and unemployment increases

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Definitions:

Valuation Approach

The methodologies and procedures used to determine the value of an asset, a company, or a financial instrument.

Expected Earnings

The anticipated profit or income generated by an investment or a business activity in a future period.

Disadvantages

The drawbacks or unfavorable aspects associated with a particular decision, action, or strategy.

P/E Ratios

Price-to-Earnings Ratio, a valuation measure comparing the current share price of a company to its per-share earnings, indicating the dollar amount an investor can expect to invest to receive one dollar of the company's earnings.