All of the following statements about equilibrium expenditure are true EXCEPT .
A) unplanned inventory investment is zero
B) actual investment is less than planned investment
C) aggregate planned expenditure equals actual aggregate expenditure
D) aggregate planned expenditure equals real GDP

Question

Quizplus · Accepted Answer

Equilibrium expenditure occurs when actual aggregate expenditure equals aggregate planned expenditure. Unplanned inventory investment is zero at equilibrium expenditure. And, aggregate planned expenditure always equals real GDP at equilibrium expenditure. The only statement that is not true is that actual investment is less than planned investment - this would imply a situation where there is not enough demand to generate the level of investment that was initially planned, which would lead to a contraction of output and income in subsequent periods.

All of the Following Statements About Equilibrium Expenditure Are True