If Firmsʹ Inventories Are Less Than They Planned, Aggregate Planned

question 354

Multiple Choice

If firmsʹ inventories are less than they planned, aggregate planned expenditure is___________ real GDP and firms___________ their production.

• A) less than; increase
• B) greater than; increase
• C) less than; decrease
• D) greater than; decrease

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Definitions:

Marginal Revenue

The surplus revenue acquired from the sale of one more unit of a good or service.

Profit Maximizing Output

The level of production at which a firm achieves the highest possible profit, determined by the point where marginal cost equals marginal revenue.

Demand Curve

A graphic representation showing how the quantity demanded of a good or service varies with its price.

Marginal Cost

The hike in complete costing that comes with the fabrication of an additional unit of a good or service.