As we move along a planned expenditures line

Question

Quizplus · Accepted Answer

Planned expenditures represent the total amount of spending that households, businesses, and the government plan to make in a given period. As long as the composition of planned expenditures remains constant, there will be no immediate effect on the overall price level. However, if demand exceeds supply, prices may eventually rise due to inflationary pressures. Similarly, if supply exceeds demand, prices may fall due to deflationary pressures. Nevertheless, planned expenditures alone do not determine the price level in the short run, as other factors such as production costs, taxes, and monetary policy also play a role.

As We Move Along a Planned Expenditures Line