Question : 21) The output gap the A) measure of output that : 1384343

 

21) The output gap is the

A) measure of output that could have been produced if the economy were fully employed.

B) dead-weight loss of inflation.

C) difference between nominal and real output.

D) percentage change in real GDP.

E) difference between Y and Y*.

22) An output gap with Y < Y* A) is desirable because it keeps wage costs low. B) represents a loss of output due to unemployed resources. C) tends to force prices up. D) occurs when there is excess demand. E) is known as an inflationary boom. 23) Suppose actual output is less than potential output. If the output gap measures the output loss due to the failure to achieve full employment, it can generally be concluded that the larger this output gap, the A) greater is the employment rate. B) greater is the unemployment rate. C) lower is frictional unemployment. D) lower the deadweight loss of unemployment. E) more upward pressure there is on prices. 24) Economic booms can cause problems as well as create benefits because they are often accompanied by A) deflationary pressures. B) excessive labour-force participation. C) inflationary pressures. D) pressure on the government budget deficit to rise. E) rising real interest rates. 25) In the study of short-run fluctuations in national income, potential income (output) is usually assumed to be A) falling at its average growth rate. B) moving together with potential output in neighbouring countries. C) constant. D) equal to actual income. E) irrelevant, as the economy is rarely there. 26) Short-run fluctuations in real GDP around its trend value are A) generally ignored by economists, because these fluctuations do not affect behaviour of other variables such as the unemployment rate. B) generally ignored by economists, because these fluctuations are constant and predictable. C) referred to in economics as "background noise." D) referred to in economics as "the business cycle." E) unimportant to the study of macroeconomics. 27) Consider an economy in which existing capital is being used at a high degree, shortages in labour and goods markets are developing, and costs are rising. Which of the following terms best describes this stage of the business cycle? A) trough B) recovery C) peak D) recession E) slump 28) On a graph showing real national income on the vertical axis and time on the horizontal axis, the trend-line would probably be a good approximation of the A) business cycle. B) distribution of income. C) inflation rate. D) path of potential output. E) unemployment rate. 29) On a graph showing real national income on the vertical axis and time on the horizontal axis, the fluctuations of real national income around the trend-line would indicate the A) business cycle. B) distribution of income. C) inflation rate. D) path of potential output. E) unemployment rate. 30) When macroeconomists use the term "recession" they usually define it as a fall in real GDP that lasts for at least A) one quarter. B) two quarters. C) three quarters. D) one year. E) two years.                                                                      

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