In the Short-Run Macro Model,if Aggregate Expenditure Is Less Than

question 191

Multiple Choice

In the short-run macro model,if aggregate expenditure is less than GDP,output will

• A) decline as firms cut production to stop the buildup of inventories
• B) decline as firms increase their prices to stop the buildup of inventories
• C) increase as firms increase production to try to stop depletion of inventories
• D) increase as firms cut their prices to try to stop depletion of inventories
• E) remain unchanged indefinitely unless government takes action

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Definitions:

Present Benefits

The advantages or positive outcomes that are received or enjoyed at the current time, as opposed to benefits that may accrue in the future.

Future Benefits

Expected advantages or gains that will be received in the future as a result of current investments or actions.

Production Possibility Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs resources and technology, illustrating trade-offs and opportunity costs.

Output Efficiency

The state of producing the maximum output with the minimum wasted effort or expense.