Answer to Question #50883 in Macroeconomics for Yoyo

Question

Explain why the following statements is True, False, or Uncertain according to economic principles. Use diagrams where appropriate. It is the explanation that is important.
If desired aggregate expenditures are less than actual output, aggregate output will decrease.

Answer 1

If desired aggregate expenditures are less than actual output, aggregate output will decrease, because there is an overproduction of the output, but in equilibrium the aggregate expenditures should be equal to the actual output (AE = Y).
So, the statement is True.