If Firms Find That Consumers Are Purchasing Less Than Expected,which

question 78

Multiple Choice

If firms find that consumers are purchasing less than expected,which of the following would you expect?

• A)Aggregate expenditure will likely be greater than GDP.
• B)Aggregate expenditure will likely be less than GDP.
• C)The economy will adjust to macroeconomic equilibrium as inventories rise,and production and employment rise.
• D)The economy will adjust to macroeconomic equilibrium as inventories fall,and production and employment rise.

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Definitions:

Legal Reserve Requirement

A regulation set by central banks determining the minimum amount of reserves that must be held by a financial institution, usually a percentage of deposits.

Federal Funds Rate

The interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight.

Required Reserves

The minimum amount of funds that a bank must hold in reserve against deposit account liabilities, as mandated by the central bank, to ensure bank liquidity.

Demand Deposits

Bank accounts that allow the holder to withdraw funds without advance notice, such as checking accounts.