Firms in a small economy anticipated that inventories would grow over the past year by $750,000, and over that year, inventories grew by exactly $750,000.This implies that
A)aggregate expenditure and GDP were equal that year.
B)there was an unplanned increase in inventories that year.
C)there was an unplanned decrease in inventories that year.
D)aggregate expenditure was greater than GDP that year.
E)there was an unanticipated rise in consumer spending.

Question

Quizplus · Accepted Answer

If firms anticipated that inventories would grow by $750,000 and inventories actually grew by exactly $750,000, it means that there was no unplanned increase or decrease in inventories. Therefore, the aggregate expenditure (which includes consumption, investment, government spending, and net exports) must have been equal to GDP, as the changes in inventories are included in GDP calculations.

Firms in a Small Economy Anticipated That Inventories Would Grow