Consider a Simple Macro Model with a Constant Price Level

question 117

Multiple Choice

Consider a simple macro model with a constant price level and demand-determined output.Suppose the level of actual national income is less than desired aggregate expenditure.In this case,

• A)inventories will build up,causing national income to rise.
• B)national income will fall,because desired expenditures are less than actual expenditures.
• C)shortages of goods and reductions in inventories will cause producers to increase output and national income to rise.
• D)national income may increase or decrease,depending on the relative sizes of the average propensity to consume and the average propensity to save.
• E)there will be no change in national income because only actual expenditure is relevant.

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