-In the Above Figure, Point E Represents the Level of Real

question 255

Multiple Choice

-In the above figure, point E represents the level of real GDP at which planned saving equals planned investment. At point A

• A) unplanned inventories increase.
• B) changes in inventories cannot be determined.
• C) unused industrial capacity exists in the economy.
• D) unplanned inventories decrease.

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Definitions:

Incentive Conflict

A situation where parties have different, competing goals. In agency relationships, the different goals of principals and agents is an example of incentive conflict.

Agent

A person who acts on behalf of another individual (a principal). Principal–agent problems are created by the incentive conflict between principals and agents.

Principal

An individual who hires another (an agent) to act on his or her behalf.

Incentivize

To motivate or encourage someone by providing a reward or incentive.