If aggregate planned expenditure is greater than real GDP,
A) an unplanned decrease in inventories leads to an increase in production.
B) an unplanned increase in inventories leads to a decrease in production.
C) a planned decrease in inventories leads to an decrease in production.
D) a planned increase in inventories leads to an increase in production.
E) an unplanned decrease in inventories leads to an increase in the price level.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds real GDP, it results in an unplanned decrease in inventories, prompting firms to increase production to meet the higher demand.

If Aggregate Planned Expenditure Is Greater Than Real GDP