Asked by
Hillary Balbi
on Nov 11, 2024
Verified
Which of the following if true would suggest that an expansionary gap exists in an economy?
A) Rapid inflation during a period when plant capacity utilization is below average
B) A steady price level coupled with a 5 percent unemployment rate
C) An unemployment rate below its natural rate and an unexpected increase in the consumer price index
D) Sluggish growth in the rate of inflation and an exceptional increase in the Dow Jones average
E) A modest increase in the number of new unemployment claims and a lower than expected price level
Expansionary Gap
A situation in an economy where actual gross domestic product exceeds the potential GDP, leading to inflationary pressures.
Natural Rate
The level of economic output at which the rate of inflation is stable, often related to the concept of the natural rate of unemployment where the labor market is in equilibrium.
Consumer Price Index
A metric that analyzes the weighted average cost of a selection of consumer goods and services, such as medical care, transportation, and food, to measure inflation.
- Pinpoint and expound upon the traits of expansionary and recessionary differences.
- Investigate the ramifications of actual production not meeting its potential capacity.
Verified Answer
TH
Learning Objectives
- Pinpoint and expound upon the traits of expansionary and recessionary differences.
- Investigate the ramifications of actual production not meeting its potential capacity.