When there is unplanned inventory investment, aggregate planned expenditure is ________ real GDP and actual investment is ________ planned investment.
A) greater than; greater than
B) greater than; less than
C) less than; greater than
D) less than; less than

Question

Quizplus · Accepted Answer

When there is unplanned inventory investment, it means that firms have more inventory than they planned to have, indicating that actual sales were less than expected. This implies that aggregate planned expenditure is less than real GDP because firms produced more than was actually sold. Actual investment is greater than planned investment because the unplanned increase in inventory counts as actual investment.

When There Is Unplanned Inventory Investment, Aggregate Planned Expenditure Is