When aggregate planned expenditure exceeds real GDP, there are unplanned ________ in inventories, and firms ________ production, so that real GDP ________.
A) decreases; increase; increases
B) decreases; decrease; increases
C) decreases; decrease; decreases
D) increases; increase; increases
E) increases; decrease; decreases

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds real GDP, there are unplanned decreases in inventories because firms sell more than they produce. To replenish inventories, firms increase production, which leads to an increase in real GDP.

When Aggregate Planned Expenditure Exceeds Real GDP, There Are Unplanned