If aggregate planned expenditure is less than real GDP
A) real GDP will increase.
B) real GDP remains unchanged.
C) real GDP will either decrease or increase, depending on the MPC.
D) inventories will increase above their target level and real GDP will decrease.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure is less than real GDP, firms end up producing more goods than are being purchased, leading to an increase in inventories above their target levels. This situation typically prompts firms to reduce production, which in turn leads to a decrease in real GDP.

If Aggregate Planned Expenditure Is Less Than Real GDP