Using the aggregate expenditures model, if aggregate expenditures (aggregate demand) is $10 trillion and aggregate output is $10.3 trillion:
a. businesses will accumulate inventories, and output will decline.
b. real output will increase if the full-employment capacity of the economy is greater than $10.3 trillion.
c. inflation will be a problem if the full-employment capacity of the economy exceeds $10.3 trillion.
d. both b and c are correct.
a
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In the "Prisoners' Dilemma" game: a. prisoners are able to collude with one another
b. prisoners are unable to communicate with one another. c. the Nash equilibrium results in prisoners serving the smallest combined prison term. d. the Nash equilibrium results in one prisoner confessing, while the other does not.
The classical model does not do a good job of explaining short-run fluctuations in the level of economic activity
a. True b. False