Consider an output gap where Y

Question

Consider an output gap where Y < Y^*.This output gap 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.

Quizplus · Accepted Answer

An output gap where Y < Y^* indicates there are unemployed resources or factors of production that are not being utilized, resulting in a loss of potential output. This can lead to an inefficient use of resources and a decrease in overall economic welfare.

Consider an Output Gap Where Y < Y*

Consider an Output Gap Where Y < Y^*