Equilibrium GDP on the demand side occurs when total spending

Question

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Equilibrium GDP on the demand side occurs when total spending equals total production, and inventories remain at desired levels. This means that firms are able to sell all of their output without having to adjust their inventories up or down. If inventories are above desired levels, firms may reduce production, which would lead to a decrease in GDP. If inventories are below desired levels, firms may increase production, which would lead to an increase in GDP. Only when total spending equals total production and inventories are at the desired level can GDP be considered in equilibrium on the demand side.

Equilibrium GDP on the Demand Side Occurs When Total Spending