Using the Aggregate Expenditures Model, Which of the Following Occurs

question 51

Multiple Choice

Using the aggregate expenditures model, which of the following occurs if aggregate expenditures exceed real GDP?
I. The economy will expand causing an increase in employment.
II. The economy will experience an inflationary gap.
III. The price level will rise.
IV. Actual investment will be less than planned investment.

• A) I, II, and IV
• B) I, III, and IV
• C) I and IV
• D) I, II, III, and IV

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Definitions:

Microeconomics

The branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources.

Individual Households

Single units comprising one or more persons within an economy that make decisions about consumption, saving, and labor supply.

Inflation

The speed at which the overall price level for products and services increases, diminishing the buying power.

Unemployment

The situation where individuals who are capable of working and willing to work do not find employment.