The table below shows data for five economies of similar size.Real GDP is measured in billions of dollars.Assume that potential output for each economy is $340 billion. TABLE 24-1 Refer to Table 24-1.How is the adjustment asymmetry demonstrated when comparing Economy A to Economy E?
A)The size of the output gap is the same in Economies A and E,but wages are rising in A and falling in E.
B)The output gap is larger in Economy A,yet wages are changing more slowly.
C)The output gap is much larger in Economy E,so wages are changing at a faster rate.
D)The size of the output gap is the same in Economies A and E but wages are falling more slowly in A than they are rising in E.
E)There is insufficient data with which to observe the adjustment asymmetry.

Question

The table below shows data for five economies of similar size.Real GDP is measured in billions of dollars.Assume that potential output for each economy is $340 billion.  TABLE 24-1 Refer to Table 24-1.How is the adjustment asymmetry demonstrated when comparing Economy A to Economy E?
A)The size of the output gap is the same in Economies A and E,but wages are rising in A and falling in E. 
B)The output gap is larger in Economy A,yet wages are changing more slowly. 
C)The output gap is much larger in Economy E,so wages are changing at a faster rate. 
D)The size of the output gap is the same in Economies A and E but wages are falling more slowly in A than they are rising in E. 
E)There is insufficient data with which to observe the adjustment asymmetry.

Quizplus · Accepted Answer

The adjustment asymmetry is demonstrated when comparing Economy A to Economy E because the size of the output gap is the same in both economies, but wages are falling more slowly in A than they are rising in E. This suggests that adjustment is asymmetric, with adjustments toward potential output taking longer in A than in E.

The Table Below Shows Data for Five Economies of Similar