When We Compare PAE and Actual Output (Y) If PAE

question 45

Multiple Choice

When we compare PAE and actual output (Y) if PAE is greater than Y we expect that:

• A) eventually production will decrease.
• B) eventually production will increase.
• C) there will be no change in aggregate production.
• D) the government will intervene by cutting down on taxes.

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Definitions:

Consumption Of X

The act of using up a particular resource X or the amount of X that is used.

Units Of Y

A generic term for the measurement used to quantify the output in a given economic or mathematical model.

Utility Function

An economic model that describes how consumers rank different bundles of goods according to the levels of satisfaction or utility those bundles provide.

Horizontal Axis

In a graph or chart, the horizontal line along which the values of one variable are plotted or measured.