The macroeconomic variable used to assess the equivalence of PAE and actual output (Y) is:
A) unemployment.
B) interest rates.
C) inventories.
D) capital expenditure.

Question

Quizplus · Accepted Answer

The macroeconomic variable used to assess the equivalence of PAE and actual output (Y) is inventories. When PAE is greater than Y, firms will accumulate unsold inventories, while when PAE is less than Y, firms will deplete their inventories. Therefore, examining the changes in inventories helps to assess whether the economy is producing at, above, or below its full capacity. Unemployment, interest rates, and capital expenditures do not necessarily indicate the equivalence or non-equivalence of PAE and Y.

The Macroeconomic Variable Used to Assess the Equivalence of PAE