Consider a simple macro model with a constant price level and demand-determined
output. Suppose the level of actual national income is less than desired aggregate
expenditure. In this case,
national income may increase or decrease, depending on the relative sizes of the
average propensity to consume and the average propensity to save.
there will be no change in national income because only actual expenditure is
relevant.
national income will fall, because desired expenditures are less than actual
expenditures.
inventories will build up, causing national income to rise.
shortages of goods and reductions in inventories will cause producers to
increase output and national income to rise.
