Explain the difference between an equilibrium level of GDP and a level of GDP which is in disequilibrium.
What will be an ideal response?
If GDP is not in equilibrium, then aggregate expenditures will exceed real GDP or vice versa. If aggregate expenditures exceed real GDP, then businesses will find their inventories reduced below the planned level of inventories. Businesses will therefore expand production to replenish inventories and the economy will not be in equilibrium until the level of planned inventories is met.
On the other hand, if real GDP exceeds aggregate expenditures, then business inventories will be above the level planned. In order to bring inventories down to their planned level, production and output will be reduced until the real GDP is equal to planned aggregate expenditures.
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A major characteristic of monopoly is
A) a single seller of a product. B) multiple sellers of a product. C) two sellers of a product. D) a few sellers of differentiated products. E) a few sellers of an identical product.
The figure above shows a time-series graph. The horizontal axis measures ________ and the vertical axis measures ________
A) time; x-values B) time; the variable of interest C) the variable of interest; time D) y-values; the variable of interest
If stock prices follow a random walk,
A. speculation in the stock market destabilizes prices. B. a stock’s past performance is not a good indicator of its future performance. C. rumors, news, and other “signals” have no effect on stock prices. D. the stock market does not participate in channeling resources toward firms with high stock prices.
Which of the following statements is true about efficiency wages?
a. Efficiency wages reduce monitoring cost of the employer. b. Employees benefit more from efficiency wages than employers. c. Productivity of the employee is usually unaffected by efficiency wages. d. Loafing is more rewarding for employees who earn efficiency wages.