When Real and Potential GDP Are Equal

question 99

Multiple Choice

When real and potential GDP are equal,

• A)prices will stop changing.
• B)the rate of inflation will equal zero.
• C)the rate of inflation will fall.
• D)the rate of inflation will remain constant.
• E)the price level will decline.

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Definitions:

Proportional

Relating to a relationship or ratio between two quantities where they increase or decrease at the same rate.

Progressive Tax System

A taxation system in which the tax rate increases as the taxable amount increases, leading to higher earners paying a larger percentage of their income in taxes than lower earners.

Government Expenditures

The total amount of money spent by the government on various services and projects, including healthcare, education, and infrastructure.

Major Expenditure

Large financial spending, often on significant items or services, that represents a considerable portion of an entity's budget.