Consider the Simplest Macro Model with Demand-Determined Output,where AE =

question 16

Multiple Choice

Consider the simplest macro model with demand-determined output,where AE = C + I.Suppose actual national income is $900 billion and desired consumption plus desired investment is $890 billion.We can expect that

• A)firms will see a decrease in inventories,and they will respond by increasing output,thereby increasing actual national income.
• B)firms will decrease autonomous investment by $10 billion until equilibrium national income is reached at $890 billion.
• C)firms will increase autonomous investment by $10 billion until equilibrium national income is reached at $900 billion.
• D)actual national income will increase until equilibrium national income is reached at $900 billion.
• E)firms will see an increase in inventories,and they will respond by decreasing output,thereby decreasing actual national income.

---

Definitions:

Expectancy Theory

This is a motivational theory in psychology that proposes an individual's behavior is determined by their anticipated outcomes or rewards.

Instrumentality

The belief that a particular action will lead to a particular outcome, emphasizing the means-end relationship in motivation theories.

Valence

The perceived value or desirability of a reward or outcome, influencing motivation and goal-directed behavior.

Locke's Goal-Setting Theory

A theory suggesting that specific and challenging goals along with appropriate feedback contribute to higher and better task performance.