If aggregate expenditure at a particular level of income is less than output,
A) output will increase
B) output will decrease
C) output will remain the same
D) output will rise slightly and then level off
E) we cannot determine what will happen to output

Question

Quizplus · Accepted Answer

If aggregate expenditure is less than output, then there will be excess supply in the market. In order to clear the excess supply, firms will decrease their production which will lead to a decrease in output.

If Aggregate Expenditure at a Particular Level of Income Is