The equilibrium level of GDP is associated with:
A)an excess of planned investment over saving.
B)no unintended investment in inventories.
C)an unintended decrease in business inventories.
D)an unintended increase in business inventories.

Question

Quizplus · Accepted Answer

At equilibrium level of GDP, there is no unintended investment in inventories as planned production levels match planned consumption levels. Any unintended investment in inventories would indicate that actual production levels are not matching actual consumption levels, which means that the economy is not at equilibrium. Option A is incorrect because an excess of planned investment over saving would result in a higher level of GDP than equilibrium. Option C is incorrect because an unintended decrease in business inventories would indicate that actual production levels are falling short of actual consumption levels, which means that the economy is not at equilibrium. Option D is incorrect for the same reason as option C.

The Equilibrium Level of GDP Is Associated With