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Which of the following is true of a recessionary gap?
A) It develops when the expected price level is less than the actual price level.
B) In the long run,this gap closes when resource suppliers negotiate lower resource payments.
C) It measures the amount by which actual output is greater than the economy's potential output.
D) In the long run,this gap closes when the short-run aggregate supply curve shifts rightward.
E) In the long run,this gap closes when the aggregate demand curve shifts rightward.
Recessionary Gap
A situation in which the real GDP of an economy is lower than its potential GDP at the full employment level, indicating underutilized resources.
Actual Output
Actual output refers to the real GDP or the total value of all goods and services produced in an economy at a given time, contrasting with potential output.
Expected Price Level
The anticipation or forecast of future prices across an economy, affecting consumer and business decisions.
- Recognize and delineate the features of expansionary and contractionary disparities.
- Detail the consequences of fluctuating resource prices on market equilibrium.
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Learning Objectives
- Recognize and delineate the features of expansionary and contractionary disparities.
- Detail the consequences of fluctuating resource prices on market equilibrium.
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