Firms in a small economy anticipated that inventories would grow over the past year by $750,000,and over that year,inventories grew by exactly $750,000.This implies that
A)aggregate expenditure and GDP were equal that year.
B)there was an unplanned increase in inventories that year.
C)there was an unplanned decrease in inventories that year.
D)aggregate expenditure was greater than GDP that year.

Question

Quizplus · Accepted Answer

Since firms anticipated that inventories would grow by $750,000 and inventories actually grew by $750,000, it indicates that there were no unplanned inventory changes. Therefore, aggregate expenditure (the sum of consumption, investment, government spending, and net exports) must be equal to GDP (the total value of goods and services produced in the economy), implying that the best answer is A.

Firms in a Small Economy Anticipated That Inventories Would Grow