Author Question: Every society faces trade-offs. Explain the concept of trade-offs. What will be an ideal ... (Read 107 times)

khang · **on:** Jun 29, 2018

Every society faces trade-offs. Explain the concept of trade-offs.

What will be an ideal response?

Question 2

If real GDP and aggregate expenditure are less than equilibrium expenditure, what happens to firms' inventories? How do firms change their production? And what happens to real GDP?

What will be an ideal response?

Swizqar · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Trade-offs refer to the idea that, because of scarcity, producing more of one good or service means producing less of another good or service.

Answer to Question 2

If real GDP and aggregate expenditure are less than their equilibrium levels, an unplanned decrease in inventories occurs. The unplanned decrease in inventories leads firms to increase production to restore inventories to their planned levels. The increase in production increases real GDP.