If real GDP ________ aggregate planned expenditure, then as a result firms ________ production.
A) equals; increase
B) exceeds; decrease
C) is less than; decrease
D) equals; decrease
E) exceeds; increase

Question

Quizplus · Accepted Answer

When real GDP exceeds aggregate planned expenditure, it indicates that there is an excess supply of goods and services. As a result, firms will decrease production to avoid accumulating unsold inventory.

If Real GDP ________ Aggregate Planned Expenditure, Then as a Result