When aggregate expenditure is more than GDP, which of the following is true?
A)There was an unplanned decrease in inventories.
B)Firms spent less on capital goods than they anticipated.
C)Households bought fewer new homes than they anticipated.
D)All of the above must be true when aggregate expenditure is more than GDP.

Question

Quizplus · Accepted Answer

Aggregate expenditure includes consumption, investment, government spending, and net exports. When aggregate expenditure is more than GDP, it means that total spending in the economy is greater than the value of output produced. The only way this can happen is if there was an unplanned decrease in inventories, which means firms sold more goods than they intended and their inventories decreased. It does not necessarily imply that firms spent less on capital goods or that households bought fewer new homes than they had anticipated.

When Aggregate Expenditure Is More Than GDP, Which of the Following