Consider a Simple Macro Model with a Constant Price Level

question 47

Multiple Choice

Consider a simple macro model with a constant price level and demand- determined output. Suppose the level of actual national income is less than desired aggregate expenditure. In this case,

• A)there will be no change in national income because only actual expenditure is relevant.
• B)national income may increase or decrease, depending on the relative sizes of the average propensity to consume and the average propensity to save.
• C)national income will fall, because desired expenditures are less than actual expenditures.
• D)inventories will build up, causing national income to rise.
• E)shortages of goods and reductions in inventories will cause producers to increase output and national income to rise.

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Definitions:

Duty

A moral or legal obligation; a responsibility one has towards others or society as a whole.

Kant

A rephrased concept from "Kantian Ethics," referring to Immanuel Kant, an 18th-century philosopher who proposed a moral philosophy emphasizing duty, moral laws, and the categorical imperative.

Generosity

The quality of being willing to give money, help, kindness, etc., more than is usual or expected.

Principle Of Need

A social and ethical principle suggesting that resources and assistance should be distributed based on individual needs.