ncorrect Question 19 01 pts If AE Y which of the following

ncorrect Question 19 0/1 pts If AE > Y, which of the following will NOT occur? Employment will increase. The MPC will rise Inventories will decline. GDP will increase

Solution

Option 2. The MPC will rise

Explanation: Aggregate expenditure (AE) s the actual demand at the current price. When AE is higher than current GDP (Y), firms will produce more and hire more workers. So, GDP and employment will go up. In addition, the inventory level will go down because of the higher demand than the current output. So, option 1,3, and 4 are invalid.

MPC will decline as MPS will rise because people will tend to save more. So, option 2 is valid.