If desired spending in the economy exceeds income we would expect ?
Correct answer: C. firms to produce more
- A. households to save more
- B. firms to produce less
- C. firms to produce more
- D. the MPC to change
Explanation
If desired spending exceeds current income, firms experience an unintended fall in inventories. They respond by increasing production, making firms produce more the expected outcome.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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