When the economy is operating well below capacity,an increase in spending tends to be reflected primarily in a(n):
A) lower level of employment.
B) increase in price.
C) lower level of output.
D) higher level of output and employment.
E) increase in business failures.

Question

Quizplus · Accepted Answer

When the economy is operating well below capacity, there is unused or idle resources such as labor and capital. An increase in spending will increase the demand for goods and services, prompting firms to increase their production and hire more workers to meet the increased demand. Consequently, the economy's output and employment will increase.

When the Economy Is Operating Well Below Capacity,an Increase in Spending