Suppose that in 2019, firms discover that their inventories are falling below their planned levels. Which of the following statements is CORRECT?
A) The level of aggregate savings must equal the level of desired investment.
B) Even though firms are trying, they are unable to maximize profits.
C) Aggregate demand is less than aggregate supply.
D) Real GDP is less than equilibrium expenditure.

Question

Quizplus · Accepted Answer

When firms find their inventories falling below planned levels, it indicates that actual sales are higher than expected, suggesting that aggregate demand is exceeding current production. This situation typically leads to an increase in production to restock inventories, implying that the economy is in a state where real GDP is less than the equilibrium expenditure, as firms are selling more than anticipated.

Suppose That in 2019, Firms Discover That Their Inventories Are