If Aggregate Expenditures (AE)are Less Than Aggregate Output (Real GDP)

question 43

Multiple Choice

If aggregate expenditures (AE) are less than aggregate output (real GDP) , then firms will:

• A)have unplanned inventory accumulation.
• B)earn above-average profits.
• C)expand production and hire more workers.
• D)be raising their prices.

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Definitions:

Firms

Business organizations engaged in professional, commercial, or industrial activities, aiming to generate profits.

Average Product

The average amount produced by each unit of a variable factor of production.

Marginal Product

The additional output that is produced by adding one more unit of a specific input, ceteris paribus.

Average Product

The output produced per unit of input used; calculated by dividing the total product by the quantity of inputs.