If real GDP is $3 billion and aggregate planned expenditure is $3.5 billion, then inventories
A)increase and productions increases.
B)remain the same and production decreases.
C)decrease and production increases.
D)decrease and production decreases.
E)increase and production decreases.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds real GDP, it indicates that demand is outstripping supply, leading to a decrease in inventories as firms sell more than anticipated. To meet the higher demand, production typically increases.

If Real GDP Is $3 Billion and Aggregate Planned Expenditure