In the aggregate expenditures model, if real GDP equals $700 billion and aggregate expenditures equal $400 billion,
A) consumption plus investment equals $300 billion.
B) planned investment equals $300 billion.
C) investment plus saving equals $300 billion.
D) unplanned inventory accumulation equals $300 billion.

Question

Quizplus · Accepted Answer

When aggregate expenditures are less than real GDP, it indicates that not all goods produced are being purchased, leading to unplanned inventory accumulation. In this case, the difference of $300 billion represents the unplanned inventory accumulation.

In the Aggregate Expenditures Model, If Real GDP Equals $700