If real GDP exceeds aggregate planned expenditure, then the change in unplanned inventories is ________ and firms ________ production.
A) positive; increase
B) positive; decrease
C) negative; increase
D) negative; decrease
E) zero; do not change

Question

Quizplus · Accepted Answer

If real GDP exceeds aggregate planned expenditure, it means that firms are producing more than what was demanded or purchased by consumers. As a result, there will be a buildup of unplanned inventories, which is positive. To adjust for this buildup, firms will decrease their production in the future, which is also positive. Therefore, the answer is B.

If Real GDP Exceeds Aggregate Planned Expenditure, Then the Change