When the aggregate expenditures model shows an equilibrium below the natural rate of output, the country's economy:
A) is experiencing inflation.
B) has an unemployment problem.
C) has had an increase in savings.
D) has some positive unplanned inventory investment.

Question

Quizplus · Accepted Answer

When the equilibrium is below the natural rate of output, it indicates that the economy is not producing at its full potential, leading to higher unemployment.

When the Aggregate Expenditures Model Shows an Equilibrium Below the Natural