Suppose the equilibrium level of expenditure is $18 trillion. If real GDP is $17 trillion, then inventories are ________ their target levels and real GDP will ________.
A) above; increase
B) above; decrease
C) below; increase
D) below; decrease

Question

Quizplus · Accepted Answer

When real GDP is below the equilibrium level of expenditure, inventories are below their target levels, prompting firms to increase production, which in turn increases real GDP.

Suppose the Equilibrium Level of Expenditure Is $18 Trillion