Assume an Economy Is in Equilibrium at an Output Level

question 237

Multiple Choice

Assume an economy is in equilibrium at an output level of $2,000 billion. If government spending decreases by $500 billion, then at the output level of $2,000 billion, there is

• A) an unplanned rise in inventories.
• B) an unplanned fall in inventories.
• C) an unplanned inventory change of zero.
• D) either an unplanned increase or decrease in inventories depending on the value of the MPC.

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Definitions:

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