When PAE Decreases Then the Economy Will Move Towards

question 56

Multiple Choice

When PAE decreases then the economy will move towards:

• A) lower levels of equilibrium GDP.
• B) higher levels of equilibrium GDP.
• C) constant levels of GDP.
• D) higher levels of equilibrium aggregate expenditure.

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Definitions:

Efficiency

The extent to which resources are used in the best way possible to produce goods and services, minimizing waste and costs.

Shortages

A situation where the demand for a product exceeds its supply at a particular price, often leading to increased prices.

Price Floor

Price floor is a government or regulatory imposed minimum price set above the equilibrium price, preventing the market price from falling below a certain level.

Surplus Of Corn

A surplus of corn signifies a situation in which the supply of corn exceeds the demand, potentially leading to lower market prices and stockpiling.