If Y

Name: If Y < AE: A)there will be a build-up of inventories in the economy. B)the stock of inventories will fall in the economy. C)managers will respond by lowering production. D)the economy must be producing less than potential GDP.
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Question

If Y < AE:
A)there will be a build-up of inventories in the economy.
B)the stock of inventories will fall in the economy.
C)managers will respond by lowering production.
D)the economy must be producing less than potential GDP.

Quizplus · Accepted Answer

If Y (actual production) is less than AE (aggregate expenditure), it means that demand is higher than supply, and there is a higher chance of running out of stock. Therefore, the stock of inventories will fall in the economy.