In the aggregate expenditures model, if aggregate expenditures are less than real GDP,
A) actual real output is less than equilibrium real output.
B) employment increases.
C) aggregate output increases.
D) there will be unplanned increases in inventories.

Question

Quizplus · Accepted Answer

If aggregate expenditures are less than real GDP, it means that there is less demand for goods and services than what is being produced. This results in unplanned increases in inventories as businesses accumulate unsold goods. To bring production in line with demand, businesses will decrease output and employment, and actual real output will be less than equilibrium real output.

In the Aggregate Expenditures Model, If Aggregate Expenditures Are Less