Assume an Economy Is in Equilibrium at an Output Level

question 237

Multiple Choice

Assume an economy is in equilibrium at an output level of $2,000 billion. If government spending decreases by $500 billion, then at the output level of $2,000 billion, there is

• A) an unplanned rise in inventories.
• B) an unplanned fall in inventories.
• C) an unplanned inventory change of zero.
• D) either an unplanned increase or decrease in inventories depending on the value of the MPC.

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Definitions:

Mandated Price

A price set by legislation or regulatory authority, not determined by market forces, usually to protect consumers or ensure fair competition.

Surplus Change

A variation in the surplus amount, which can result from changes in market conditions or policies affecting supply and demand.

Sellers' Costs

The total expenses incurred by sellers in providing goods or services, including production, labor, and material costs.

Price Comparison

A technique where consumers evaluate the prices of different products or services to find the best deal.