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| 1. |
What happens to the level of national income when aggregates supply exceeds aggregate demand? |
| Answer» Solution : If AGGREGATE supply does exceed (INTENDED) aggregate demand over a given period of time, there will be an involuntary build up in stocks (inventories) and national income (output) will have been GREATER than it otherwise WOULD have been. Typically, in the FOLLOWING time period, the equilibrium would be restored as excess stocks are subsequently run down, resulting in national income (output) being lower than it otherwise would have been. | |