What does the potential GDP line illustrate? OA. The potential GDP line is vertical because potential GDP is independent of the price level. OB. The potential GDP line shows the relationship between potential GDP and the quantity of real GDP supplied. Oc. Potential GDP is illustrated by an upward-sloping curve. D. Along the potential GDP line the money wage rate is constant and the real wage rate rises as the price level rises. O O

The expenditure approach measures GDP by adding together Select one: O A. wages, salaries and supplementary labour income, and other factor incomes. O B. the total expenditures of consumers, firms, net exporters, and by governments at all levels. O C. wages, salaries and supplementary labour income, other factor income, subsidies paid by the government, indirect taxes paid, and income of nonfarm unincorporated businesses. the total expenditures of consumers and firms. compensation of employees, rental income, corporate profits, net interest, proprietors' income, indirect taxes paid, and capital consumption expenditures, and by subtracting subsidies paid by the government. O D. O E.

Suppose the current equilibrium GDP is less than potential GDP. Which of the following actions could the government take to close the output gap? Select one or more: O a. No action is necessary O b. Decrease expenditures C. Decreases taxes Od. Increase taxes O e. Increase expenditures

In the aggregate expenditure (AE) model, the economy is driven to its equilibrium by changes in a. government expenditures on goods and services that are the result of changes in real GDP. O b. autonomous expenditures that are the result of changes in real GDP. investment that are the result of changes in real GDP. O C. O d. induced expenditures that are the result of changes in real GDP.

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Potential GDP Aggregate expenditure AE, E, 45° Real GDP (Y) On the 45 degrees line: O A. GDP is equal to aggregate expenditure OB. GDP is greater than aggregate expenditure OC. Aggregate expenditure is constant OD. GDP is constant Aggregate Expenditure

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