Consider a simple macro model with a constant price level and demand- determined output. In such a model, the level of national income will
A)remain constant if firms are accumulating inventories.
B)tend to rise if firms have unplanned decumulation of inventories.
C)tend to rise if desired aggregate expenditure is less than actual national income.
D)be in equilibrium if all of the resources of the economy are fully employed.
E)remain constant if savings equals consumption.

Question

Quizplus · Accepted Answer

In a demand-determined output model, if firms have unplanned decumulation of inventories, it indicates that demand for goods and services is higher than expected, which would result in an increase in national income to meet the excess demand.

Consider a Simple Macro Model with a Constant Price Level