In the income-expenditure framework,if planned aggregate expenditures are less than real gross domestic product (GDP),_____.
A)saving will increase
B)the price level will increase
C)inventories will increase
D)inventories will decrease
E)consumption will decrease

Question

Quizplus · Accepted Answer

Planned aggregate expenditures are the sum of consumption, investment, government spending, and net exports. If planned aggregate expenditures are less than real GDP, it means that goods and services are being produced at a faster rate than they are being consumed. This will cause inventories to increase as firms accumulate unsold inventory.

In the Income-Expenditure Framework,if Planned Aggregate Expenditures Are Less Than