(Figure: Aggregate Expenditures) the Figure Shows the Aggregate Expenditures for an Economy

question 115

Multiple Choice

(Figure: Aggregate Expenditures) The figure shows the aggregate expenditures 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.

---

Definitions:

Profit Margin

A financial metric that measures the amount of net income earned with each dollar of sales by calculating the percentage of revenue that exceeds the cost of goods sold.

Net Income

The net income of a company, which is the remaining amount after deducting all costs and taxes from the total revenue.

Sales

The revenue a company earns from selling goods or services in its normal operations.

Operating Expenses

Costs associated with running a business's core operations on a daily basis, excluding costs of goods sold.