A country reports that unplanned inventories increased during 2014. The increase in unplanned inventories leads to
A) consumers increasing their consumption expenditure, which increases GDP.
B) firms decreasing production, which decreases GDP.
C) firms increasing production, which increases GDP.
D) actual aggregate expenditure being different than real GDP.
E) the government decreasing production, which decreases GDP.

Question

Quizplus · Accepted Answer

When unplanned inventories increase, it typically indicates that goods are not being sold as expected, leading firms to decrease production to adjust to the lower demand, which in turn decreases GDP.

A Country Reports That Unplanned Inventories Increased During 2014