If aggregate planned expenditures exceed real GDP, then
A) inventories increase above their planned levels and businesses decrease their production.
B) inventories decrease below their planned levels and businesses increase their production.
C) there is no equilibrium level of real GDP.
D) inventories decrease below their planned levels and businesses decrease their production.
E) unplanned inventory changes equal zero.

Question

Quizplus · Accepted Answer

When aggregate planned expenditures exceed real GDP, businesses experience a decrease in inventories below their planned levels, prompting them to increase production to meet the higher demand.

If Aggregate Planned Expenditures Exceed Real GDP, Then