Suppose the equilibrium level of expenditure is $18 trillion. If real GDP is $19 trillion, then planned expenditures
A) exceed real GDP, and real GDP will increase.
B) are less than real GDP, and real GDP will decrease.
C) are equal to real GDP, and there will be no change in real GDP.
D) are less than real GDP, and real GDP will increase.

Question

Quizplus · Accepted Answer

When planned expenditures are less than real GDP, it indicates that the economy is producing more than what is being consumed or invested. This situation leads to an accumulation of unsold goods, prompting producers to cut back on production, which in turn causes real GDP to decrease towards the equilibrium level of expenditure.

Suppose the Equilibrium Level of Expenditure Is $18 Trillion