According to the Aggregate Expenditures Model, What Happens Initially When

question 43

Multiple Choice

According to the aggregate expenditures model, what happens initially when there is a sudden, unexpected drop in consumer spending?

• A) Aggregate expenditures immediately fall by the amount of the drop in consumer spending.
• B) The equilibrium level of output immediately rises.
• C) The equilibrium level of output immediately falls.
• D) Aggregate expenditures hold steady at first due to a matching increase in unplanned inventory investment.

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