Within the Framework of the Keynesian Model, If Aggregate Expenditures

question 33

Multiple Choice

Within the framework of the Keynesian model, if aggregate expenditures exceed aggregate output, then:

• A) the inventories of firms would decline, and the firms would expand output in order to restore their inventories to desired levels.
• B) the inventories of firms would increase, and the firms would reduce output until inventories were cut back to the desired level.
• C) the current level of income would persist in the future.
• D) firms would reduce their investment, and the economy would fall into a recession.

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Definitions:

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