Question 17
[Maximum number: 1]
What is most likely to increase if an economy enters a negative output gap?
A
business confidence
B
economic growth rate
C
inflation rate
D
unemployment rate
CAIE A-Level Economics 9.2.2 Output gaps
Practise interpreting positive and negative output gaps and predicting effects on growth, prices, unemployment and spare capacity.
How this is tested
- link a positive output gap to above-trend growth, inflationary pressure and less spare capacity
- predict unemployment, confidence and price changes when an economy enters a negative output gap
- use GDP and unemployment data to infer likely demand pressure or budget effects