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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

What happens in the economy if total expenditures (TE) are greater than total production (TP)?

To determine

The economy when the total production is higher than the total expenditure.

Explanation

Firms are the producers who make the products and the total production of the economy refers to the aggregation of all the individual production of the firms in the economy. Similarly, the total expenditure of the economy refers to the aggregation of all the expenditures of the consumers in the economy.

When the total expenditure is higher than the total production in the economy, the demand for goods and services in the economy would be higher than the supply of goods and services in the economy. As a result, there will be a supply shortage in the economy, which leads to fall in the business inventories below the optimal level...

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