If aggregate planned expenditure is greater than GDP, then
A) inventory investment is smaller than planned.
B) inventory investment is larger than planned.
C) production is too high.
D) a recession will result.
E) the consumption function will shift downward to restore the equilibrium.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds GDP, firms sell more than they expected, leading to a decrease in inventories, meaning inventory investment is smaller than planned.

If Aggregate Planned Expenditure Is Greater Than GDP, Then