If there is an unplanned increase in inventories, aggregate planned expenditure is
A)greater than real GDP and firms increase production.
B)greater than real GDP and firms decrease production.
C)less than real GDP and firms increase production.
D)less than real GDP and firms decrease production.
E)less than real GDP and firms decrease investment.

Question

Quizplus · Accepted Answer

An unplanned increase in inventories indicates that goods are not being sold as expected, meaning aggregate planned expenditure is less than real GDP. As a result, firms will decrease production to adjust to the lower demand.

If There Is an Unplanned Increase in Inventories, Aggregate Planned