Exhibit 9-3 Keynesian aggregate expenditures model

As shown in Exhibit 9-3, if GDP is $14 trillion, the economy experiences unplanned inventory:
A) accumulation of $12 trillion.
B) depletion of $14 trillion.
C) accumulation of $2 trillion.
D) depletion of $4 trillion.

Question

Exhibit 9-3 Keynesian aggregate expenditures model
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As shown in Exhibit 9-3, if GDP is $14 trillion, the economy experiences unplanned inventory:
A) accumulation of $12 trillion. 
B) depletion of $14 trillion. 
C) accumulation of $2 trillion. 
D) depletion of $4 trillion.

Quizplus · Accepted Answer

According to the Keynesian aggregate expenditures model, if GDP is less than aggregate expenditures, then there will be unplanned inventory accumulation. In this case, the aggregate expenditures line intersects the 45-degree line at a level of $16 trillion, which means that at a GDP level of $14 trillion, aggregate expenditures are $2 trillion less. This implies that there will be an unplanned inventory accumulation of $2 trillion.

Exhibit 9-3 Keynesian Aggregate Expenditures Model