In the Aggregate Expenditures Model, If Aggregate Expenditures (AE)are Less

question 105

Multiple Choice

In the aggregate expenditures model, if aggregate expenditures (AE) are less than GDP, then:

• A)inventory is unchanged.
• B)inventory is depleted.
• C)employment increases.
• D)GDP decreases.

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Definitions:

Risk-averse

A characteristic of preferring to avoid loss over making a gain, typically by selecting the option with the smallest possible risk.

Expected Utility

A theory in economics that quantifies how choices are made when the outcomes are uncertain.

Utility

A measure of satisfaction or pleasure that individuals get from the consumption of goods and services.

Risk Premium

The extra return expected by investors for holding a risky asset over a risk-free one, serving as compensation for the additional risk.