If aggregate expenditures fall below the country's ability to produce, what would happen?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

If aggregate expenditures fall below the country's ability to produce, the most likely effect would be a recession (if the shortfall lasts long enough) and rising unemployment.

Aggregate expenditure is one way to measure national income.  In other words, it is something like Gross Domestic Product.  If national income is lower than the country's ability to produce, then the country is not producing as much as it is capable of producing.  This means that various resources are being underutilized.  This is consistent with a recession when factories stop being used full-time and workers are laid off.

nikasho0100's profile pic

nikasho0100 | Student, Grade 12 | (Level 1) Salutatorian

Posted on

The immdeiate result would anyway be reccesion.

As this is similar to the gdp of a country fall lin it would create unemployment, lower economic growth, underproduction of goods and services ect.

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