When aggregate planned expenditure _{--------------------} real GDP, there are unplanned _{--------------------} in inventories, and firms _{--------------------} production, therefore decreasing real GDP. A)exceeds; increases; increase B)is less than; increases; decrease C)is less than; increases; increase D)exceeds; decreases; decrease E)is less than; decreases; decrease

Question

Quizplus · Accepted Answer

When aggregate planned expenditure is less than real GDP, there are unplanned increases in inventories because goods are not being sold as expected. As a result, firms decrease production to adjust to the lower demand, leading to a decrease in real GDP.

When Aggregate Planned Expenditure -------------------- Real GDP, There Are Unplanned

When Aggregate Planned Expenditure _{--------------------} Real GDP, There Are Unplanned