In the income-expenditure framework,if planned aggregate expenditures are less than real GDP,
A)then saving must be larger than consumption
B)the price level will increase
C)inventories will increase
D)inventories will decrease
E)consumption will decrease

Question

Quizplus · Accepted Answer

If planned aggregate expenditures are less than real GDP, it means that firms are producing more goods than consumers are purchasing. This leads to an accumulation of unsold goods, or inventories. Therefore, inventories will increase.

In the Income-Expenditure Framework,if Planned Aggregate Expenditures Are Less Than