If the Full-Employment Level of Real GDP Is Greater Than

question 163

Multiple Choice

If the full-employment level of real GDP is greater than the equilibrium level of real GDP, the nation would be experiencing a(n)

• A) inflationary gap.
• B) recessionary gap.
• C) demand-pull inflation.
• D) rising prices.

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Definitions:

Expected Return-Beta Relationship

A concept in the Capital Asset Pricing Model (CAPM), indicating that the expected return on an investment is related to its beta, which measures the investment's volatility relative to the market.

CAPM

Capital Asset Pricing Model, a financial model that describes the relationship between systematic risk and expected return for assets, particularly stocks.

Marginal Price

This is the cost of producing one additional unit of a good or service.

Zero-Beta Security

A financial instrument whose returns are not correlated with those of the market, meaning it has a beta of zero, thus not contributing to portfolio volatility.