Equilibrium GDP Will Not Exist Where Output Exceeds Aggregate Demand

question 100

Multiple Choice

Equilibrium GDP will not exist where output exceeds aggregate demand because businesses will notice that

• A)their profits are positive.
• B)inventory stocks are building up.
• C)inventory stocks are being depleted.
• D)their level of depreciation is rising.

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Definitions:

Aggregate Demand

Full magnitude of demand for every service and product in an economy, measured at a specific total price level during a certain period.

Investment Spending

Expenditures on capital goods that will be used for future production.

Aggregate-Demand Curve

A graphical representation that shows the total amount of goods and services demanded across all levels of the economy at different price levels.

Investment Spending

Expenditures on capital goods by firms and governments that are intended to increase productive capacity in the future.