If real GDP is $3 billion and aggregate planned expenditure is $3.5 billion, then inventories
A)increase and productions increases.
B)increase and production decreases.
C)decrease and production increases.
D)decrease and production decreases.
E)remain the same and production decreases.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds real GDP, inventories decrease as businesses sell more than they produce, prompting an increase in production to replenish inventories.

If Real GDP Is $3 Billion and Aggregate Planned Expenditure