If AE Y,which of the following will NOT occur?
A) Inventories will decline.
B) Actual investment will be more than planned investment.
C) Employment will increase.
D) GDP will increase.

Question

If AE > Y,which of the following will NOT occur?
A) Inventories will decline.
B) Actual investment will be more than planned investment.
C) Employment will increase.
D) GDP will increase.

Quizplus · Accepted Answer

When AE (Aggregate Expenditure) is greater than Y (Output), it indicates that the economy is experiencing an excess demand. This situation typically leads to an increase in production to meet the higher demand, which in turn causes inventories to decline (as firms sell more than they anticipated), employment to increase (as firms hire more workers to increase production), and GDP to increase (as the total output of the economy grows). However, actual investment being more than planned investment is not a direct consequence of AE > Y; instead, it reflects a situation where firms end up investing more than they initially intended, which could be due to various factors not directly related to the relationship between AE and Y.

If AE > Y,which of the Following Will NOT Occur