If aggregate planned expenditures are less than the level of real GDP,
A) real GDP and income will either decrease or remain unchanged, depending on the MPC.
B) real GDP and income remain unchanged.
C) real GDP and income will increase.
D) inventories will increase above their target level and real GDP will decrease.

Question

Quizplus · Accepted Answer

When aggregate planned expenditures are less than real GDP, businesses experience an unplanned increase in inventories, leading them to reduce production, which in turn decreases real GDP.

If Aggregate Planned Expenditures Are Less Than the Level of Real