Consider a simple macro model with a constant price level and demand-determined output.When national income falls short of desired aggregate expenditures,unplanned inventory ________ will induce firms to ________ the rate of output production.
A)depletion; lower
B)depletion; raise
C)buildup; lower
D)buildup; raise
E)at zero; maintain the current

Question

Quizplus · Accepted Answer

When national income falls short of desired aggregate expenditures, it means that actual sales are higher than expected, leading to unplanned inventory depletion. Firms will respond by raising the rate of output production to replenish their inventories and meet the higher demand.

Consider a Simple Macro Model with a Constant Price Level