If Planned Aggregate Expenditure Is Below Potential GDP and Planned

question 266

Multiple Choice

If planned aggregate expenditure is below potential GDP and planned aggregate expenditure equals GDP, then

• A)actual inventory investment will be less than planned inventory investment.
• B)actual inventory investment will be greater than planned inventory investment.
• C)the economy is in a recession.
• D)the economy is at full employment.
• E)the economy is in an expansion.

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Definitions:

Liquidation

The process of closing a business and distributing its assets to claimants, typically occurring when a company is insolvent.

Homemade Leverage

A strategy where investors adjust the leverage or risk of their portfolio through borrowing or investing their own money, rather than relying on the company to do so.

Direct Bankruptcy Costs

These are the costs associated directly with the bankruptcy process, including legal fees, accounting fees, and other administrative expenses for processing a bankruptcy filing.

Legal and Administrative Expenses

Costs associated with the legal operation of a business and general administrative tasks, including legal fees, licensing, and managerial salaries.