In a small economy in 2013,aggregate expenditure was $800 million while GDP that year was $850 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 2013.
C)Firm investment in inventories was greater than anticipated in 2013.
D)Aggregate expenditure is always less than GDP in developing countries.

Question

Quizplus · Accepted Answer

When firm investment in inventories is greater than anticipated, it means that firms produced more than what was sold, leading to higher GDP compared to aggregate expenditure.

In a Small Economy in 2013,aggregate Expenditure Was $800 Million