Question

When the aggregate spending is not sufficient to produce that level of output which requires full employment of the available resources, it results in ______________.

• A. inflation
• B. unemployment
• C. social problems
• D. none of the above

Answer 1

The correct option is B unemployment

When the aggregate spending is not sufficient to produce an adequate level of output which requires full employment of available resources then it means aggregate demand is less than aggregate supply, then the planned inventory rises above the desired level. To clear the unwanted increase in inventory, firms plan to reduce the output which reduces the employment in the economy.