Consider the Simplest Macro Model with Demand-Determined Output

question 80

Multiple Choice

Consider the simplest macro model with demand-determined output.If desired aggregate expenditure is greater than actual national income,then

• A)inventories will likely begin to fall,causing firms to increase production.
• B)actual national income must be less than the equilibrium level.
• C)actual national income must be greater than the equilibrium level.
• D)inventories will likely begin to rise,causing firms to reduce production.
• E)both A and B are correct.

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Definitions:

Habituation

The psychological process where there is a decrease in response to a stimulus after being repeatedly exposed to it, signifying a form of learning or adaptation.

Sensitization

A process by which a person becomes increasingly responsive or sensitive to a stimulus after repeated exposure to it.

Higher-order Conditioning

A form of learning in which a stimulus is first made meaningful or significant through classical conditioning and then that stimulus is used as a base for learning about additional stimuli.

Sensitization

An increased reaction to a stimulus following repeated exposure to it, often leading to heightened responsiveness to other stimuli.