When aggregate expenditure is greater than GDP, then there will be an
A)unplanned increase in inventories and GDP will increase.
B)unplanned decrease in inventories and GDP will increase.
C)unplanned increase in inventories and GDP will decrease.
D)unplanned decrease in inventories and GDP will decrease.

Question

Quizplus · Accepted Answer

When aggregate expenditure exceeds GDP, it indicates that the total spending in the economy is greater than the total output. This leads to an unplanned decrease in inventories as businesses sell more than they produce, prompting them to increase production, which in turn increases GDP.

When Aggregate Expenditure Is Greater Than GDP, Then There Will