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

Question

Quizplus · Accepted Answer

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

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