If real GDP and aggregate expenditure are greater than equilibrium expenditure, what happens to firms' inventories? How do firms change their production? And what happens to real GDP?
What will be an ideal response?
If real GDP and aggregate expenditure are greater than their equilibrium levels, an unplanned increase in inventories occurs. The unplanned increase in inventories leads firms to decrease production to restore inventories to their planned levels. The decrease in production decreases real GDP.
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To measure the change in the standard of living, it is best to use the growth rate
A) from the Rule of 70. B) of the price level. C) of real GDP per person. D) of real GDP. E) of the population.
The price elasticity of demand
a. is of no use to producers b. tells producers what will happen to total profit if they change product price c. tells producers what will happen to quantity supplied if they change product price d. tells producers what will happen to total revenue if they change product price e. tells producers what will happen to price in the following time period