Use the figure below to answer the following questions.
Figure 11.2.2
The economy depicted does not engage in international trade and has no government.Planned aggregate expenditure AE) is equal to the sum of consumption expenditure C) and investment I).
-Refer to Figure 11.2.2.When real GDP is $100 billion,
A)aggregate planned expenditure equals real GDP, and the economy is in equilibrium.
B)aggregate planned expenditure is greater than real GDP, and firms decrease production.
C)aggregate planned expenditure is less than real GDP, and firms increase production.
D)real GDP is less than aggregate planned expenditure, and firms increase production.
E)real GDP is greater than aggregate planned expenditure, and firms decrease production.

Question

Use the figure below to answer the following questions.
  Figure 11.2.2
The economy depicted does not engage in international trade and has no government.Planned aggregate expenditure AE) is equal to the sum of consumption expenditure C) and investment I).
-Refer to Figure 11.2.2.When real GDP is $100 billion,
A)aggregate planned expenditure equals real GDP, and the economy is in equilibrium. 
B)aggregate planned expenditure is greater than real GDP, and firms decrease production. 
C)aggregate planned expenditure is less than real GDP, and firms increase production. 
D)real GDP is less than aggregate planned expenditure, and firms increase production. 
E)real GDP is greater than aggregate planned expenditure, and firms decrease production.

Quizplus · Accepted Answer

When real GDP is less than aggregate planned expenditure, firms will increase production to meet the higher demand.

Use the Figure Below to Answer the Following Questions