If actual real GDP is greater than the equilibrium level of real GDP (i.e., the aggregate expenditures function is below the 45-degree line), what happens to restore equilibrium to the economy?
At the current level of real GDP, aggregate spending (C + I + G + NX) is less than aggregate supply. The amount of goods and services produced is greater than the amount people intend to buy. Inventories rise above the levels firms desire to hold. These unintended inventory increases are a signal to firms to reduce production. Production will continue to fall until the amount firms produce just equals aggregate expenditures.
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Using a big-push strategy for LDC economic development, the private sector
a. does not participate at any stage b. participates actively only at the beginning c. contributes matching funds to all government-financed projects d. participates after the government push creates the multiplicity of markets e. hurts the process by charging high prices for goods produced since it typically has monopoly power
The profit that a monopolist earns represents a loss to society that is measured through deadweight loss
a. True b. False Indicate whether the statement is true or false