Firms in a small economy anticipated that inventories would grow over the past year by $500,000.Over that year,inventories actually grew by only $400,000.This implies that
A)aggregate expenditure that year was greater than GDP that year.
B)there was an unplanned increase in inventories that year.
C)there was a planned increase in inventories that year.
D)aggregate expenditure that year was equal to GDP that year.

Question

Quizplus · Accepted Answer

When inventories grow by less than anticipated, it implies that actual sales were higher than expected, leading to aggregate expenditure being greater than what firms planned for, hence greater than GDP.

Firms in a Small Economy Anticipated That Inventories Would Grow