In a small economy in 2016, aggregate expenditure was $850 million while GDP that year was $800 million.Which of the following can explain the difference between aggregate expenditure and GDP that year?
A)Aggregate expenditure is always less than GDP in developed countries.
B)Firm investment in inventories was less than anticipated in 2016.
C)Firm investment in inventories was greater than anticipated in 2016.
D)Aggregate expenditure is always less than GDP in developing countries.
E)Aggregate expenditure does not account for consumer spending.

Question

Quizplus · Accepted Answer

When aggregate expenditure exceeds GDP, it indicates that firms invested less in inventories than anticipated, leading to a reduction in inventory levels.

In a Small Economy in 2016, Aggregate Expenditure Was $850