-In the above figure, if the level of real GDP is $15 trillion
A) inventories are above the levels planned by firms.
B) inventories are below the levels planned by firms.
C) inventories are equal to the levels planned by firms.
D) planned expenditures are zero.

Question

-In the above figure, if the level of real GDP is $15 trillion
A) inventories are above the levels planned by firms. 
B) inventories are below the levels planned by firms. 
C) inventories are equal to the levels planned by firms. 
D) planned expenditures are zero.

Quizplus · Accepted Answer

When real GDP is above the equilibrium level, firms experience lower sales than expected, leading to inventories accumulating beyond planned levels. This prompts firms to reduce production, moving the economy back towards equilibrium. However, without seeing the specific figure mentioned, the general principle is that if actual GDP is higher than the equilibrium GDP, it indicates that actual sales are less than what firms anticipated, causing inventories to rise above planned levels. This scenario typically results in firms adjusting by reducing output.

-In the Above Figure, If the Level of Real GDP