Use the figure below to answer the following questions.

Figure 27.2.2
The economy depicted does not engage in international trade and has no government. Planned aggregate expenditure (AE)is equal to the sum of consumption expenditure (C)and investment (I).
-Refer to Figure 27.2.2. When real GDP is $100 billion,
A)real GDP is less than aggregate planned expenditure, and firms increase production.
B)aggregate planned expenditure is greater than real GDP, and firms decrease production.
C)real GDP is greater than aggregate planned expenditure, and firms decrease production.
D)aggregate planned expenditure equals real GDP, and the economy is in equilibrium.
E)aggregate planned expenditure is less than real GDP, and firms increase production.

Question

Use the figure below to answer the following questions.
  
Figure 27.2.2
The economy depicted does not engage in international trade and has no government. Planned aggregate expenditure (AE)is equal to the sum of consumption expenditure (C)and investment (I).
-Refer to Figure 27.2.2. When real GDP is $100 billion,
A)real GDP is less than aggregate planned expenditure, and firms increase production. 
B)aggregate planned expenditure is greater than real GDP, and firms decrease production. 
C)real GDP is greater than aggregate planned expenditure, and firms decrease production. 
D)aggregate planned expenditure equals real GDP, and the economy is in equilibrium. 
E)aggregate planned expenditure is less than real GDP, and firms increase production.

Quizplus · Accepted Answer

When real GDP is $100 billion and it is less than aggregate planned expenditure, firms will increase production to meet the higher demand.

Use the Figure Below to Answer the Following Questions