When aggregate planned expenditure is less than GDP,
A)the economy definitely is at its equilibrium expenditure and firms do not change production.
B)firms increase production until the economy reaches equilibrium expenditure.
C)the economy might be at its equilibrium expenditure and if it is, firms do not change their production.
D)the economy definitely is at its equilibrium expenditure but even so, firms decrease production.
E)firms decrease production until the economy reaches equilibrium expenditure.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure is less than GDP, it indicates that not all goods and services produced are being purchased, leading to an accumulation of unsold inventory. As a result, firms will decrease production to align with the lower level of demand until equilibrium is reached.

When Aggregate Planned Expenditure Is Less Than GDP