If Aggregate Expenditure Is Greater Than GDP, How Will the Economy

question 282

Multiple Choice

If aggregate expenditure is greater than GDP, how will the economy reach macroeconomic equilibrium?

• A)Inventories will decline and GDP and employment will decline.
• B)Inventories will rise and GDP and employment will decline.
• C)Inventories will decline and GDP and employment will rise.
• D)Inventories will rise and GDP and employment will rise.
• E)Inventories will rise, GDP will fall, and employment will rise.

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Definitions:

Direct Fixed Manufacturing Costs

Costs that are directly attributable to the production process and do not vary with the level of output but remain constant within a specific time period.

Component

A part or element of a larger system, device, or piece of equipment that is essential to its function.

Variable Expenses

Costs that change in relation to the level of activity or volume of production.

Fixed Expenses

Costs that do not vary with the level of production or sales over a short period, such as rent and salaries.