Firms in a small economy planned that inventories would grow over the past year by $500,000.Over that year,inventories did grow by exactly $500,000.This implies that
A)aggregate expenditure that year was equal to GDP that year.
B)there was an unplanned increase in inventories that year.
C)there was an unplanned decrease in inventories that year.
D)aggregate expenditure that year was greater than GDP that year.

Question

Quizplus · Accepted Answer

If firms planned for inventories to grow by $500,000 and that is exactly what happened, it means that the goods produced were sold or used in the economy during that year. This implies that aggregate expenditure (consumption, investment, government spending, net exports) was equal to GDP, which is the total value of all the final goods and services produced in the economy during that year.

Firms in a Small Economy Planned That Inventories Would Grow