Assume that inventories declined by more than what analysts predicted.This implies that
A)planned aggregate expenditure was greater than real GDP.
B)planned aggregate expenditure was equal to real GDP.
C)planned aggregate expenditure was less than real GDP.
D)planned aggregate expenditure is unrelated to real GDP.

Question

Quizplus · Accepted Answer

When inventories decline more than predicted, it implies that actual sales were higher than expected, indicating that planned aggregate expenditure was greater than real GDP. This is because firms planned for a certain level of sales (and thus production), but actual sales exceeded those expectations, leading to a reduction in inventories beyond what was anticipated.

Assume That Inventories Declined by More Than What Analysts Predicted