When the Economy Produces Less Than Its Potential Output, It

question 139

Multiple Choice

When the economy produces less than its potential output, it is:

• A) called a recession.
• B) not in long-run equilibrium.
• C) producing a quantity less than the long-run aggregate supply quantity.
• D) All of these are true.

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Definitions:

Illiquid Assets

Assets that cannot be easily sold or converted into cash without a significant loss in value.

Financial Institutions

Organizations that provide financial services, such as banks, insurance companies, and investment funds, playing a critical role in the economy.

Legal Reserve Requirements

Guidelines enforced by central banks on the minimal reserves that banks should maintain in relation to their deposits.

Destroyed Money

The process of physically eliminating money from circulation, typically by central banks, to manage a currency's supply.