If Aggregate Expenditures Are Less Than Real GDP, Then

question 96

Multiple Choice

If aggregate expenditures are less than real GDP, then:

• A)both inventories and real GDP will decline.
• B)inventories will decline but real GDP will increase.
• C)inventories will increase and real GDP will decline.
• D)both inventories and real GDP will increase.
• E)inventories will increase but real GDP will remain unchanged.

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Definitions:

Accounts Receivable

Owed sums to a corporation by its customers for commodities or services furnished or taken advantage of, with the payment still forthcoming.

Tax Shield

A reduction in taxable income for an individual or corporation achieved through claiming allowable deductions such as interest on loans.

Noncash Expenses

Expenses recorded on an income statement that do not involve actual cash flow, such as depreciation or amortization.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, representing the benefits one could have received by taking a different decision.