Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $12 trillion, then inventories are___________ their target levels and real GDP will___________ .
A) above; increase
B) below; decrease
C) above; decrease
D) below; increase

Question

Quizplus · Accepted Answer

When real GDP is below the equilibrium level of expenditure, inventories are below their target levels, leading firms to increase production, which causes real GDP to increase.

Suppose the Equilibrium Level of Expenditure Is $13 Trillion