Consider the Simplest Macro Model with Demand- Determined Output, Where

question 41

Multiple Choice

Consider the simplest macro model with demand- determined output, where AE = C + I. Suppose that actual national income is $900 billion and desired consumption plus desired investment is $920 billion. We can expect that

• A)firms will decrease autonomous investment by $20 billion until equilibrium national income is reached at $900 billion.
• B)firms will see an increase in inventories, and they will respond by decreasing output, thereby decreasing actual national income.
• C)actual national income will decrease until equilibrium national income is reached at $900 billion.
• D)firms will see a decrease in inventories, and they will respond by increasing output, thereby increasing actual national income.
• E)firms will increase autonomous investment by $20 billion until equilibrium national income is reached at $920 billion.

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Definitions:

Chlorofluorocarbon

A class of compounds used in refrigerants and aerosols, known for their role in ozone depletion.

Ozone Destroyer

Substances, typically man-made chemicals like CFCs, that lead to the depletion of the ozone layer in the Earth's stratosphere.

Deforestation

The large-scale removal of forest land or tree plantations, often resulting in damage to the quality of the land.

Soil Nutrient Loss

The depletion of essential minerals and compounds from soil, often due to factors like erosion, over-farming, or leaching, which can reduce soil fertility and agricultural productivity.