In the short-run macro model, if aggregate expenditure is less than GDP, output will
a. decline as firms cut production to stop the buildup of inventories
b. decline as firms increase their prices to stop the buildup of inventories
c. increase as firms increase production to try to stop depletion of inventories
d. increase as firms cut their prices to try to stop depletion of inventories
e. remain unchanged indefinitely unless government takes action
A
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If potential GDP for the first quarter of 2013 = $75.8 billion, and real GDP for the first quarter of 2013 = $80.3 billion, then the output gap was
A) -5.9%. B) -5.6%. C) 5.6%. D) 5.9%.
The results of many empirical studies of short-run cost functions have shown that total costs conform to
A) a quadratic total cost function. B) a power cost function. C) a linear cost function. D) a cubic cost function.
A firm will never operate at a loss
Indicate whether the statement is true or false
In 2007, the U.S. economy was operating close to potential. The budget deficits experienced by the United States in 2007 was:
A. primarily cyclical deficits. B. primarily structural deficits. C. neither structural nor cyclical deficits. D. about evenly split between structural and cyclical deficits.