When Current Production of Goods and Services in an Economy

question 25

Multiple Choice

When current production of goods and services in an economy is greater than planned aggregate expenditure,_____.

• A)inventories of goods and services will increase
• B)firms will increase production to replenish depleted inventories
• C)businesses and households will increase planned aggregate spending
• D)the price level will automatically rise to restore equilibrium in the economy
• E)leakages must equal planned injections

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Definitions:

Perfectly Price Inelastic

A situation in demand where the quantity demanded does not change regardless of changes in the price of a product or service.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good that consumers are willing to buy.

Perfectly Price Elastic

A situation in which the quantity demanded or supplied changes infinitely in response to any change in price.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded.