Assume an Economy Is in Equilibrium at an Output Level

question 175

Multiple Choice

Assume an economy is in equilibrium at an output level of $1,600 billion. If government purchases increase by $200 billion, then at the output level of $1,600 billion, there is

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

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Definitions:

Selective optimization

A strategy of maximizing performance in certain areas while compensating for declines or limitations in others.

Compensation

A process that contributes to successful development. When a loss of some kind prevents the use of one means to an end, the individual finds another means.

Well-being

A general state of health, happiness, and satisfaction with one’s life.

Environmental mastery

The ability to effectively manage and manipulate one's surrounding environment to meet personal needs and goals.