Which of the following is correct if real GDP is $20 trillion and spending is $20 trillion?
A) Inventories increase by 0.5 trillion.
B) Inventories decrease by 0.5 trillion.
C) GDP increases by 0.5 trillion.
D) GDP decreases by 0.5 trillion.
E) Spending and GDP are in equilibrium.

Question

Quizplus · Accepted Answer

If real GDP and spending are equal, it means that all goods and services produced within the economy have been purchased by households, firms, and the government. There is no change in inventories in this scenario, and GDP neither increases nor decreases. This is the definition of equilibrium, hence the correct option is E.

Which of the Following Is Correct If Real GDP Is