When aggregate planned expenditure ________ real GDP, there are unplanned ________ in inventories, and firms ________ production, therefore decreasing real GDP.
A) is less than; increases; decrease
B) exceeds; decreases; decrease
C) is less than; increases; increase
D) exceeds; increases; increase
E) is less than; decreases; decrease

Question

Quizplus · Accepted Answer

When aggregate planned expenditure is less than real GDP, there are unplanned increases in inventories because goods are not being sold as expected. As a result, firms decrease production to adjust to the lower demand, which leads to a decrease in real GDP.

When Aggregate Planned Expenditure ________ Real GDP, There Are Unplanned