In the aggregate expenditures model, if an economy operates above equilibrium GDP, there will be:
A)unplanned inventory depletion.
B)an increase in GDP.
C)a decrease in employment.
D)an increase in employment.

Question

Quizplus · Accepted Answer

When an economy operates above equilibrium GDP, it means that production exceeds aggregate demand, leading to unplanned inventory accumulation. This results in a decrease in production and employment as firms adjust to reduce excess inventory.

In the Aggregate Expenditures Model, If an Economy Operates Above