In the short run, with predetermined prices, when output is less than planned aggregate expenditure:
A)potential output is greater than short run equilibrium output.
B)potential output is less than short run equilibrium output.
C)planned investment is less than actual investment.
D)planned investment is greater than actual investment.

Question

Quizplus · Accepted Answer

In this case, planned aggregate expenditure is greater than output so inventories are shrinking. That means actual investment, due to falling inventory, is less than planned investment.

In the Short Run, with Predetermined Prices, When Output Is