Capacity utilization increases.What is the impact on aggregate expenditures and income?

Question

Quizplus · Accepted Answer

When capacity utilization increases, it means that production is increasing. This leads to an increase in output and employment, which in turn increases wages, disposable income, and ultimately, aggregate expenditures. As aggregate expenditures increase, firms respond by producing more, creating a positive feedback loop that results in an increase in overall income.

Capacity Utilization Increases