Consider the simplest macro model with a constant price level and demand-determined output.If national income is less than its equilibrium level,it is likely that firms' inventories are ________,and so national income tends to ________.
A)accumulating; rise
B)accumulating; fall
C)being depleted; rise
D)being depleted; fall
E)constant; fall

Question

Quizplus · Accepted Answer

When national income is less than its equilibrium level, it indicates that demand is higher than what firms anticipated, leading to their inventories being depleted. As firms increase production to replenish their inventories, national income tends to rise.

Consider the Simplest Macro Model with a Constant Price Level