The Figure Given Below Shows the Income-Expenditure Model

question 11

Multiple Choice

The figure given below shows the income-expenditure model. Which of the following best describes the situation at point B?

• A) Consumption expenditure exceeds disposable income
• B) Real GDP exceeds aggregate expenditure
• C) Aggregate expenditure is exactly equal to real GDP
• D) Aggregate expenditure exceeds real GDP
• E) Producers experience an unexpected accumulation of inventory

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Definitions:

Survivorship Bias

The logical error of focusing on instances that survived a selection process and overlooking those that did not because of their lack of visibility.

Backfill Bias

A bias that can occur when historical performances of investment portfolios are artificially inflated because only successful funds are reported or included in analyses.

Incentive Bias

A psychological lean or predisposition towards certain decisions or actions due to promised rewards or incentives.

Survivorship Bias

The error of focusing on the successes or survivors in a group and overlooking those that failed, which can lead to overly optimistic beliefs or conclusions.