A country reports that when real GDP is $3.0 trillion, aggregate planned expenditure is $4.0 trillion.When real GDP equals $3.0 trillion,
A) unplanned inventory changes by -$1.0 trillion.
B) unplanned inventory changes by $1.0 trillion.
C) planned inventory changes by $1.0 trillion.
D) planned inventory changes by -$1.0 trillion.
E) both planned and unplanned inventory changes are -$1.0 trillion.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds real GDP, firms are selling less than expected, which results in unplanned inventory buildup. In this case, aggregate planned expenditure is $4.0 trillion, while real GDP is $3.0 trillion, indicating an unplanned inventory buildup of $1.0 trillion. Therefore, the correct choice is A.

A Country Reports That When Real GDP Is $3