Question: In the chapter we explained the difference between desired expenditures and actual expenditures. a. Is national income accounting based on desired or actual expenditures? Explain.

In the chapter we explained the difference between desired expenditures and actual expenditures.

a. Is national income accounting based on desired or actual expenditures? Explain.

b. Suppose there were a sudden decrease in desired consumption expenditure. Explain why this would likely be followed by an equally sudden increase in actual investment in inventories.

c. Illustrate the event from part

(b) in a $45^{\circ}$-line diagram.

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