(Figure: Aggregate Expenditures) the Figure Shows the Aggregate Expenditures Line

question 98

Multiple Choice

(Figure: Aggregate Expenditures) The figure shows the aggregate expenditures line for an economy. Which is the proper sequence of events if income was originally at $100?

• A) Total spending exceeds income, firms reduce production, workers are laid off, and incomes fall until equilibrium is reached.
• B) Total income exceeds spending, firms expand production, workers are hired, and incomes rise until equilibrium is reached.
• C) Total spending exceeds income, firms expand production, workers are hired, and incomes rise until equilibrium is reached.
• D) Total income exceeds spending, firms reduce production, workers are laid off, and incomes fall until equilibrium is reached.

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Definitions:

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