If aggregate planned expenditure exceeds real GDP, then
A) unplanned inventory changes are positive.
B) unplanned inventory changes are negative.
C) aggregate planned expenditure must decrease to restore the equilibrium.
D) real GDP will decrease.
E) planned inventory changes must be negative.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds real GDP, firms sell more than they produce, leading to a decrease in inventories, which results in negative unplanned inventory changes.

If Aggregate Planned Expenditure Exceeds Real GDP, Then