When there is unplanned inventory investment, aggregate planned expenditure is real GDP and actual investment is planned investment.
A) less than; greater than
B) greater than; less than
C) less than; less than
D) greater than; greater than

Question

Quizplus · Accepted Answer

Unplanned inventory investment means that businesses have produced more goods than they intended to sell. As a result, there will be unsold inventories, which will be counted as part of actual investment but not part of planned investment. This means that actual investment will be greater than planned investment, and since planned investment is part of aggregate planned expenditure, aggregate planned expenditure will be less than real GDP.

When There Is Unplanned Inventory Investment, Aggregate Planned Expenditure Is