In the aggregate expenditures model, if an economy operates above equilibrium GDP, there will be:
A)unplanned inventory depletion.
B)an increase in GDP.
C)an increase in employment.
D)a decrease in GDP.

Question

Quizplus · Accepted Answer

When an economy operates above equilibrium GDP, it means that aggregate expenditures are less than the total output, leading to unplanned inventory accumulation. This results in a decrease in GDP as firms reduce production to adjust to the lower level of demand.

In the Aggregate Expenditures Model, If an Economy Operates Above