When planned aggregate expenditure is larger than real GDP, actual inventories ________ planned inventories and real GDP ________.
A) are less than; increases
B) are less than; decreases
C) are more than; increases
D) are more than; decreases
E) are not related to; increases

Question

Quizplus · Accepted Answer

When planned aggregate expenditure exceeds real GDP, it indicates that the economy is spending more than it is producing. This leads to a reduction in actual inventories as goods are sold faster than they are produced, prompting firms to increase production, which in turn increases real GDP.

When Planned Aggregate Expenditure Is Larger Than Real GDP, Actual