If aggregate planned expenditures are less than real GDP, then
A)there is no equilibrium level of real GDP.
B)inventories decrease below their planned levels and businesses increase their production.
C)inventories increase above their planned levels and businesses decrease their production.
D)unplanned inventory changes equal zero.
E)inventories increase above their planned levels and businesses increase their production.

Question

Quizplus · Accepted Answer

When aggregate planned expenditures are less than real GDP, businesses experience an unplanned increase in inventories, leading them to decrease production to align with the lower level of demand.

If Aggregate Planned Expenditures Are Less Than Real GDP, Then