A country reports that unplanned inventories increased during 2012.The increase in unplanned inventories leads to
A) the government decreasing production, which decreases GDP.
B) consumers increasing their consumption expenditure, which increases GDP.
C) firms decreasing production, which decreases GDP.
D) firms increasing production, which increases GDP.
E) actual aggregate expenditure being different than real GDP.

Question

Quizplus · Accepted Answer

When unplanned inventories increase, it indicates that goods are not being sold as expected, leading firms to decrease production, which in turn decreases GDP.

A Country Reports That Unplanned Inventories Increased During 2012