Question: If output is initially above the equilibrium level, the output will exceed aggregate expenditure. What should producers do when this situation occurs?

If output is initially above the equilibrium level, the output will exceed aggregate expenditure. What should producers do when this situation occurs?

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1. Identify your reference point when making a decision based on an element of risk.

3. If there are reasonable alternatives, think about your decisions based on the different reference points and see if there are any contradictions in the decisions.

4. It is only at this point that you can give the problem your full attention in relation to the various ways you have framed the problem.