Refer to the information provided in Figure 8.10 below to answer the questions that follow. Figure 8.10
-Refer to Figure 8.10. At aggregate output levels above $1,000 million, there are
A) unplanned increases in inventories and output increases.
B) unplanned decreases in inventories and output increases.
C) unplanned decreases in inventories and output decreases.
D) unplanned increases in inventories and output decreases.

Question

Refer to the information provided in Figure 8.10 below to answer the questions that follow.  Figure 8.10
-Refer to Figure 8.10. At aggregate output levels above $1,000 million, there are
A) unplanned increases in inventories and output increases. 
B) unplanned decreases in inventories and output increases. 
C) unplanned decreases in inventories and output decreases. 
D) unplanned increases in inventories and output decreases.

Quizplus · Accepted Answer

At aggregate output levels above $1,000 million, the intersection of the 45-degree line and the aggregate expenditure line is below the 45-degree line, indicating that planned aggregate expenditure is less than aggregate output. This leads to unplanned increases in inventories, as goods are not being sold at the intended pace. To correct this situation, firms will decrease output, which results in a decrease in aggregate output. Therefore, there are unplanned increases in inventories and output decreases.

Refer to the Information Provided in Figure 8