Prior to the 1970s, the model of choice was the aggregate expenditures model. According to
This model, if the economy was in equilibrium at an income greater than the full employment level, then the primary economic problem would be
A) excessive bank lending.
B) potential crises in financial markets.
C) inflation.
D) excess aggregate demand.

Question

Quizplus · Accepted Answer

If the economy is in equilibrium at an income level greater than full employment, it indicates that demand is outstripping supply, leading to upward pressure on prices, or inflation.

Prior to the 1970s, the Model of Choice Was the Aggregate