If firms sell exactly what they expected to sell, all of the following will be true except
A)aggregate expenditure will be greater than GDP.
B)there is no unplanned change in inventories.
C)inventories will not change, and GDP and employment will remain stable.
D)aggregate expenditure will be equal to GDP.
E)unplanned investment will be zero.

Question

Quizplus · Accepted Answer

If firms sell exactly what they expected to sell, there will be no unplanned change in inventories. This means that the planned expenditure and output will be equal, which is also known as GDP. Hence, aggregate expenditure will be equal to GDP (choice D) and inventories will not change, and GDP and employment will remain stable (choice C). Unplanned investment will be zero (choice E) because there is no unexpected change in inventories. However, aggregate expenditure cannot be greater than GDP (choice A) because they are the same thing.

If Firms Sell Exactly What They Expected to Sell, All