In the aggregate expenditures model, if aggregate expenditures (AE)are less than GDP, then:
A)inventory is unchanged.
B)inventory is depleted.
C)employment increases.
D)GDP decreases.

Question

Quizplus · Accepted Answer

If aggregate expenditures are less than GDP, it means that not all goods and services produced are being purchased, leading to an accumulation of unsold inventory. As a result, businesses may reduce production, leading to a decrease in GDP.

In the Aggregate Expenditures Model, If Aggregate Expenditures (AE)are Less