If real GDP is less than planned aggregate expenditure, there will be an unplanned decline in inventories, ultimately leading to a movement up along the aggregate expenditure line.

Question

Quizplus · Accepted Answer

When real GDP is less than planned aggregate expenditure, firms sell more goods than expected, leading to an unplanned decline in inventories. This situation prompts firms to increase production, moving the economy up along the aggregate expenditure line as they try to match the higher level of aggregate demand.

If Real GDP Is Less Than Planned Aggregate Expenditure, There