In the aggregate expenditures model, if aggregate expenditures (AE) are greater than GDP, then:
A) inventory is accumulated.
B) inventory is unchanged.
C) employment decreases.
D) employment increases.

Question

Quizplus · Accepted Answer

When aggregate expenditures exceed GDP, it indicates that the economy is demanding more goods and services than are currently being produced. This excess demand typically leads firms to increase production to meet the higher demand, which often involves hiring more workers, thereby increasing employment.

In the Aggregate Expenditures Model, If Aggregate Expenditures (AE) Are