When aggregate planned expenditure exceeds real GDP,
A) real GDP decreases.
B) an unplanned increase in inventories occurs.
C) firms decrease production.
D) an unplanned decrease in inventories occurs.
E) real GDP remains at its equilibrium level.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds real GDP, it means that consumers and businesses are spending more than expected, leading to an unplanned decrease in inventories as firms sell more goods than they anticipated.

When Aggregate Planned Expenditure Exceeds Real GDP