Which of the following is not true of an economic expansion?
A) The economy is overheated.
B) There is too much spending.
C) Production exceeds equilibrium output.
D) The aggregate expenditure line is too low to create an intersection at full-employment output.
E) Unemployment will be unusually low.

Question

Quizplus · Accepted Answer

An economic expansion is characterized by an increase in output, income, employment, and spending. Therefore, option D is not true because during an economic expansion, the level of aggregate expenditure (which includes consumption, investment, government spending, and net exports) is high enough to create an intersection at or near full-employment output. Option A, B, C, and E are all true of an economic expansion: A) The economy can become overheated in an expansion, as inflationary pressures may arise due to increased demand for goods and services. B) A surge in spending can occur during an expansion, fueled by rising household incomes, increased business investment, and government stimulus. C) Production can exceed equilibrium output as firms increase their capacity utilization and hire more workers. E) Unemployment tends to be low during an expansion as businesses need workers to keep up with demand.

Which of the Following Is Not True of an Economic