At equilibrium expenditure, unplanned changes in inventory
A) must be positive.
B) might be either positive or negative.
C) must be zero.
D) must be negative.

Question

Quizplus · Accepted Answer

At equilibrium expenditure, unplanned changes in inventory must be zero. This is because at the point of equilibrium, aggregate expenditure is equal to aggregate output, which means that firms are producing exactly what consumers are buying. Therefore, there are no unplanned changes in inventory. If there were any unplanned changes in inventory, it would mean that firms were producing more or less than what consumers were buying, which would cause a shift in the aggregate expenditure and output, and the economy would move away from the equilibrium point.

At Equilibrium Expenditure, Unplanned Changes in Inventory