ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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economic growth
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a recession
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a trough
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a positive output gap
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a negative output gap
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Detailed explanation-1: -A positive output gap occurs when actual output is more than full-capacity output.
Detailed explanation-2: -If current real GDP is less than full employment output, an economy is in a recession. If current real GDP is higher than full employment output, an economy is experiencing a boom. If the current output is equal to the full employment output, then we say that the economy is in long-run equilibrium.
Detailed explanation-3: -If the demand for products is greater than the capacity to supply them for a period of time, there is a positive output gap.
Detailed explanation-4: -The above-equilibrium real wage rate decreases the quantity of labor demanded and increases the quantity of labor supplied. If the real wage rate is above the full-employment equilibrium level, the natural unemployment rate increases.
Detailed explanation-5: -Higher unemployment increases the negative output gap. A fall in unemployment implies economy getting closer to the level of full employment. Firms reporting hiring difficulties. If firms struggle to fill vacancies this indicates a positive output gap.