Suppose the economy operates at potential output, if the amount that businesses plan to invest is greater than the amount that consumers plan to save, then
A. there will be an inflationary gap.
B. there will be a recessionary gap.
C. equilibrium GDP will be less than aggregate investment.
D. the economy will experience inventory accumulation.
Answer: A
You might also like to view...
In a two-economy model of the United States and another large economy made up of the rest of the world, if desired saving by the rest of the world declined
A) U.S. investment would increase. B) U.S. saving would decrease. C) the world real interest rate would increase. D) the world real interest rate would decrease.
You using a Laspeyres (fixed-weight )price index to compare price changes over time, and the index is based on consumption bundles from 2005 when energy costs were lower and housing costs were higher. Your results are likely to:
A) Overstate changes in the cost of living because the weight assigned to energy is too small. B) Overstate changes in the cost of living because the weight assigned to energy is too large. C) Understate changes in the cost of living because the weight assigned to housing is too small. D) Understate changes in the cost of living because the weigh assigned to housing is too large.