Question

1. If equilibrium real GDP is less than its long-run level:

   	A.	there is a recessionary gap.
   	B.	the economy is not in macroeconomic equilibrium.
   	C.	the economy is in an unemployment equilibrium.
   	D.	both (a) and (c).

1 points   

QUESTION 6

1. Stagflation is a period of:

   	A.	rising unemployment and rising prices.
   	B.	falling unemployment and falling prices.
   	C.	rising unemployment and falling prices.
   	D.	falling unemployment and rising prices.

1 points   

QUESTION 7

1. The GDP (Y) of an economy with household, business, government, and foreign sectors is equal to:

   	A.	Y = C + I + G + X
   	B.	Y = C + I + G - M
   	C.	Y = C + I + G + X - M
   	D.	Y = C + I + G + X - M - T

Answer 1

D. both (a) and (c)

Recessionary gap refers to the situation when the equilibrium is below full employment level, it can also be called under or unemployment level of equilibrium.

A. rising unemployment and rising prices.

Stagflation refers to a situation when there is high level of unemployment with high level of prices in the economy.

C. Y = C + I + G + X - M

Tax is not included explicitly, it has to be deducted from income which equals to disposable income