If aggregate planned expenditure equals GDP, then firms'
A) inventories exceed planned inventories.
B) inventories are less than planned inventories.
C) inventories equal planned inventories.
D) do not have any inventories.
E) actual investment has no relationship to their planned investment.

Question

Quizplus · Accepted Answer

If aggregate planned expenditure equals GDP, it means that there is no unplanned inventory accumulation or reduction. In other words, firms' inventories match their planned inventories, which is represented by the equilibrium point where aggregate expenditure intersects with the 45-degree line in the Keynesian model. Therefore, choice (C) is correct.

If Aggregate Planned Expenditure Equals GDP, Then Firms