If the economy is operating below (to the left of) the IS curve, then real GDP is _______ than planned expenditure,
A) greater; inventories are decreasing faster than expected, and businesses will reduce production.
B) less; inventories are decreasing faster than expected, and businesses will increase production.
C) greater; inventories are increasing faster than expected, and businesses will reduce production.
D) less; inventories are increasing faster than expected, and businesses will increase production.

Question

Quizplus · Accepted Answer

When the economy is below the IS curve, real GDP is less than planned expenditure, leading to faster-than-expected inventory depletion, prompting businesses to increase production.

If the Economy Is Operating Below (To the Left Of)