If planned aggregate expenditure is less than total production,
A)actual inventories will equal planned inventories.
B)firms will experience an unplanned decrease in inventories.
C)GDP will decrease.
D)the economy is in equilibrium.
E)government spending will fall.

Question

Quizplus · Accepted Answer

When planned aggregate expenditure is less than total production, firms will have unsold goods, leading to an increase in inventories. This signals that production exceeds demand, prompting firms to reduce output, which decreases GDP.

If Planned Aggregate Expenditure Is Less Than Total Production