Which of the following most completely describes the workings of the aggregate expenditures model?
A)If aggregate expenditures are less than aggregate output, then there is unplanned inventory accumulation, and real GDP will decrease.
B)If aggregate expenditures are greater than aggregate output, then there is unplanned inventory depletion, and real GDP will increase.
C)Aggregate output generates an equal amount of aggregate spending.
D)Both a. and b. above are correct.

Question

Quizplus · Accepted Answer

The aggregate expenditures model suggests that when aggregate expenditures are less than aggregate output, inventories accumulate, leading to a decrease in real GDP. Conversely, when aggregate expenditures exceed aggregate output, inventories deplete, leading to an increase in real GDP. Both A and B describe these scenarios accurately.

Which of the Following Most Completely Describes the Workings of the Aggregate