Question 4 1 pts Choose the best interpretation of \"expansionary gap\" The econ

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Question 4 1 pts Choose the best interpretation of "expansionary gap" The economy is operating above it's potential output. Unemployment is lower than at full employment" and rGDP is higher than at potential output. The economy is operating below it's potential output. Unemployment is higher than at "full employment" and rGDP is lower than at potential output. The economy is operating below it's potential output. Unemployment is lower than at "full employment" and rGDP is higher than at potential output. The economy is operating above it's potential output. Unemployment is higher than at "full employment" and rGDP is lower than at potential output. Question 5 1 pts Why does the SRAS curve slope upward? When the price level increases in the short run, firms make more money (and their costs rise slower than their revenues), so they increase their output When the price level increases in the short run, firms make more money but have higher costs, so they reduce their output When the price level increases in the short run, firms make less money but have lower costs, so they increase their output When the price level increases in the short run, firms make more money (and their costs rise faster than their revenues), so they decrease their output Question 6 1 pts If MPC 0.6 and you receive an additional disposable income of $200, which of the following is true? You will spend $120 and save $80 You will spend $80 and save $120 You will end up with $333.33 because of the multiplier You will save the entire $200 because the tax rate is 60%

Explanation / Answer

4. Answer- option A

Expansionary gap occurs when an economy is operating at an output level which is above potential GDP. Full employment occurs at the level of potential GDP. But when an economy is producing more than potential output, unemployment will be lower than full employment because firms will hire more workers to produce this extra output.

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