If Output Is Less Than Planned Aggregate Expenditure, There Will

question 207

Multiple Choice

If output is less than planned aggregate expenditure, there will be

• A) an unplanned increase in inventories.
• B) an unplanned decrease in inventories.
• C) no change in inventories.
• D) a planned increase in inventories.

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Definitions:

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be either positive or negative.

Social Costs

The total cost of an action or decision, including both private costs and any externalities borne by society at large.

Positive Externality

Positive Externality occurs when a transaction or activity benefits a third party not directly involved, like the societal benefit of education or vaccinations.

External Benefit

A benefit that an individual or firm confers on others without receiving compensation.