Consider a macro model in which output is assumed to be demand-determined.One situation which may justify this assumption is when
A)net exports are positive.
B)net exports are negative.
C)the marginal propensity to consume out of disposable income is equal to the marginal propensity to spend out of national income.
D)all resources in the economy are fully employed.
E)the economy is operating with some unemployed resources.

Question

Quizplus · Accepted Answer

If the economy is operating with some unemployed resources, it is likely that output is demand-determined. In other words, there is room for an increase in demand to result in an increase in output without putting upward pressure on prices due to resource constraints. This is because there are still resources available to be utilized in the production process.

Consider a Macro Model in Which Output Is Assumed to Be