QUESTION 3 When total expenditures are greater than total production,is produced

Question

QUESTION 3 When total expenditures are greater than total production,is produced than households want to buy, which leads to inventory, which signals firms that they havewhich causes firms to increase production. OA less, decreases, underproduced OB more, increases; underproduced O C less, increases, underproduced D more, decreases;, overproduced QUESTION 4 Who would be most likely to agree that "People do not always save more as interest rates rise"? O A a classical economist oB John Maynard Keynes o C an efficiency wage theorist D a and b E a, b, and c

Explanation / Answer

(Question 3) Option (A)

When total expenditure > Total production, it means that less is produced than what households want to buy. It leads to a decrease in inventory which signals to firms that they have underproduced. So, firms increase production.

(Question 3) Option (B)

As per Keynes, higher interest rate does not always increase savings by people, therefore full employment by equality of saving and investment brought about by change in interest rate (as proposed by Classical theory) is not always achieved.

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