Consider the Simplest Macro Model with Demand-Determined Output

question 80

Multiple Choice

Consider the simplest macro model with demand-determined output.If desired aggregate expenditure is greater than actual national income,then

• A)inventories will likely begin to fall,causing firms to increase production.
• B)actual national income must be less than the equilibrium level.
• C)actual national income must be greater than the equilibrium level.
• D)inventories will likely begin to rise,causing firms to reduce production.
• E)both A and B are correct.

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Definitions:

Profit Or Loss Model

A financial model that calculates the difference between a company’s revenues and its expenses, helping understand its profitability over a certain period.

Unrealized Gains

Increases in the value of assets that have not yet been sold, and therefore, the gains have not been realized or reflected in the income statement.

Common Shares

Equity securities that represent ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Debt Investments

Debt investments refer to investments made in bonds or other debt instruments where the investor lends money to an issuer in exchange for periodic interest payments and the return of the principal at maturity.