When Real GDP Is Less Than Potential GDP, an Increase

question 120

Multiple Choice

When real GDP is less than potential GDP, an increase in the quantity of money leads to a(n)

• A) increase in both real GDP and the price level.
• B) decrease in real GDP and an increase in the price level.
• C) constant real GDP and an increase in the price level.
• D) decrease in both real GDP and the price level.
• E) increase in real GDP and a decrease in the price level.

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Definitions:

Depreciation Expense

The portion of the cost of a fixed asset that is considered an expense due to its wear and tear over a specific period.

Useful Life

The estimated period over which a fixed asset is expected to be usable by the entity, affecting its depreciation calculation.

Straight-Line Method

An accounting method of depreciating fixed assets evenly over their useful lives.

Depreciation Expense

Depreciation expense is the systematic allocation of the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.