Help? Multiple choice question (1 Viewer)

[powersupply]

What happens if supply is greater than demand?
(a) The level of economic activity stays the same.
(b) The economy expands.
(c) The economy contracts.

 

[starshine02]

I think its a but im not sure. i don't think its b though

 

[SuperSemen]

Possibly C since there is an excess in supply, thus implying that there has been a shortage of demand for that particular product or what not. This then means that the economy is getting worse/contracting.

 

[chrisman9519]

well i think the only way to solve such a dumb question is to quantify the problem.

lets say demand in an economy is 90 things and supply is 100 things, then only 90 things will be consumed. hence the economy shrinks as there is excess productive capacity.

in other words ...if there is $90 that people want to consume and $100 that they can consume, it is assumed that the $10 will either be spent on imports or is saved (assuming a 5 sector circular flow model) in which case the economy shrinks...

a dumb question. i think..