what happens when exante demand for final good fall short of the output of final goods that the producers have planned to produce in a given year
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Answer:
In a two sector (Household and Firm) economy, ex-ante aggregate demand (AD) for final goods is the sum total of ex-ante consumption expenditure (C) and ex-ante investment expenditure (I) on final goods. ... (i) Ex-ante Consumption Expenditure: This refers to planned (desired) consumption expenditure of households.
When exante demand for final good fall short of the output of final goods that the producers have planned to produce in a given year. The factors regarding this are explained below:
- Economy is in equilibrium when ex ante demand is equals to supply of exante in the final goods market.
- Exante or aggregate demand is the desired or planned values of the variables that are taken into account.
- In the economy at a given time period at a given overall price level the total amount of goods and services demanded is the aggregate demand.
- The sum total of ex-ante investment expenditure and consumption expenditure on final goods for final goods of ex-ante demand in the two sectors of economy that are firm and household.