Use the Following to Answer Questions

question 104

Multiple Choice

Use the following to answer questions .
Exhibit: Aggregate Expenditures Curve
Figure 13-6
-(Exhibit: Aggregate Expenditures Curve) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, G = Government Purchases. Further, I_P and G are autonomous. If real GDP produced is $4,000, how will equilibrium be restored in the economy?

• A) Policymakers must conduct contractionary policies to move the economy toward its equilibrium real GDP.
• B) Firms will reduce their output in subsequent periods, moving the economy toward its equilibrium real GDP.
• C) The price level must rise to reduce aggregate expenditures and restore equilibrium.
• D) The price level must fall to increase aggregate expenditures and restore equilibrium.