Firms in a small economy planned that inventories would grow over the past year by $300,000.Over that year,inventories actually grew by $400,000.This implies that
A)aggregate expenditure that year was less than GDP that year.
B)there was an unplanned decrease in inventories that year.
C)there was a planned decrease in inventories that year.
D)aggregate expenditure that year was equal to GDP that year.

Question

Quizplus · Accepted Answer

When inventories grow more than planned, it implies that firms sold less than they expected, meaning aggregate expenditure was less than the GDP.

Firms in a Small Economy Planned That Inventories Would Grow