What is produced and consumed in the economy is determined jointly by
A) standards of living and business cycles.
B) the economy's productive capacity and the preferences of consumers.
C) the behaviour of business managers and government policies.
D) government policies and the economy's productive capacity.
E) the preferences of consumers and the behaviour of business managers.

Question

Quizplus · Accepted Answer

The economy's production possibilities or productive capacity limits what can be produced, while the preferences of consumers (i.e. demand) determine what is consumed. Production and consumption are interdependent, so it is necessary to consider both factors in determining what is produced and consumed in the economy.

What Is Produced and Consumed in the Economy Is Determined