If aggregate demand falls below aggregate output (AD<Y), according to the Keynesian model, what happens to...
If aggregate demand falls below aggregate output (AD<Y), according to the Keynesian model, what happens to unintended inventories?
| a. | There is a depletion of unintended inventories. | |
| b. | There is an accumulation of unintended inventories. | |
| c. | Unintended inventories remain unchanged. | |
| d. | Unintended inventories fall to zero (0). | |
| e. | None of the above |
Homework Answers
Right Answer: ( B)
If aggregate demand falls below the aggregate output, it suggests that there is fall in demand and problem of deficiency demand has increased. If there is deficiency in demand in economy, output will remain unsold or intended inventory will accumulate;
In such situation, equilibrium is established at lower level or level that does not correspond to full employment,
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If aggregate demand falls below aggregate output
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