Solved

-In the Above Table, There Are No Taxes and No

Question 274

Multiple Choice

 Real GDP  (dollars)   Consumption  expenditure  (dollars)   Investment  (dollars)   Government  expenditure  (dollars)  3,0002,5005005004,0003,2505005005,0004,0005005006,0004,7505005007,0005,5005005008,0006,250500500\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Real GDP } \\\text { (dollars) }\end{array} & \begin{array} { l } \text { Consumption } \\\text { expenditure } \\\text { (dollars) }\end{array} & \begin{array} { l } \text { Investment } \\\text { (dollars) }\end{array} & \begin{array} { l } \text { Government } \\\text { expenditure } \\\text { (dollars) }\end{array} \\\hline 3,000 & 2,500 & 500 & 500 \\\hline 4,000 & 3,250 & 500 & 500 \\\hline 5,000 & 4,000 & 500 & 500 \\\hline 6,000 & 4,750 & 500 & 500 \\\hline 7,000 & 5,500 & 500 & 500 \\\hline 8,000 & 6,250 & 500 & 500 \\\hline\end{array}
-In the above table, there are no taxes and no imports or exports. If current real GDP is equal to
$7,000, then firms will


A) not change production because $7,000 is the equilibrium level of real GDP.
B) decrease production to restore inventories to their target level.
C) increase production to rebuild inventories to their target level.
D) None of the above answers is correct.

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