Consider the Simplest Macro Model with a Constant Price Level

question 36

Multiple Choice

Consider the simplest macro model with a constant price level and demand- determined output. If desired aggregate expenditure is less than actual national income, then

• A)actual national income is below the equilibrium level.
• B)actual national income must be above the equilibrium level.
• C)inventories begin to fall, causing national income to fall.
• D)inventories begin to fall, causing firms to increase production.
• E)actual national income must be at equilibrium.

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Definitions:

Service Charge

An additional fee charged for services rendered, often seen in the hospitality and banking industries.

Merchandise Sale

The process of selling goods that are purchased for resale, constituting a primary revenue source for retail businesses.

Allowance Method

A method in accounting for managing bad debts by predicting the accounts that cannot be collected at the end of every period.

Direct Write-off Method

An accounting method for recognizing bad debts where the specific uncollectible accounts receivable are written off as they are identified.