Chapter 19 21-30

23) Which of the following correctly describes the meaning of the expression Y < Y*?

actual output is less than potential output - a recessionary gap

24) Which of the following correctly describes the meaning of the expression Y > Y*?

actual output is more than potential output - an inflationary gap

28) In the study of short-run fluctuations in national income, potential income (output) is usually assumed to be

constant.

26) 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

greater is the unemployment rate.

27) Economic booms can cause problems as well as create benefits because they are often accompanied by

inflationary pressures.

30) 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

peak

21) In macroeconomics, the "output gap" is the difference between

potential real national income and actual real national income.

29) Short-run fluctuations in real GDP around its trend value are

referred to in economics as "the business cycle."

25) An output gap with Y < Y*

represents a loss of output due to unemployed resources.

22) In macroeconomics, what is the output gap?

the difference between Y and Y*