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:

Sugar Pills

Placebo tablets made of sugar and other inert substances, used in clinical trials to test the effectiveness of medications.

Placebo Effects

Positive changes in a patient's condition after receiving a treatment with no therapeutic effect, attributed to the individual's belief in the treatment's efficacy.

Physical Disorders

Medical conditions primarily affecting the body's structure or function, not primarily due to mental health issues.

Psychological Disorders

Mental disorders or illnesses that affect an individual's thinking, feeling, mood, or behavior, and can be chronic or episodic in nature.