For a private closed economy, an unintended decline in inventories suggests that
A) aggregate expenditures are less than the business sector expected them to be.
B) aggregate expenditures exceed production.
C) actual investment exceeds saving.
D) planned investment is greater than consumption.

Question

Quizplus · Accepted Answer

An unintended decline in inventories indicates that actual sales were higher than businesses anticipated, meaning aggregate expenditures (total spending on goods and services) were greater than the amount of goods and services produced. This scenario leads to a reduction in inventories as the demand exceeds the supply.

For a Private Closed Economy, an Unintended Decline in Inventories