When aggregate expenditure is more than GDP,which of the following is true?
A)There was an unplanned decrease in inventories.
B)Firms spent less on capital goods than they planned.
C)Households bought fewer new homes than they planned.
D)All of the above must be true when aggregate expenditure is more than GDP.

Question

Quizplus · Accepted Answer

When aggregate expenditure is more than GDP, it means that actual spending in the economy is higher than the production capacity of firms. This indicates a decrease in inventories - firms are selling more than they are producing, thus unplanned decreases in inventories occur. Option B is incorrect because if firms spent less on capital goods than they planned, it would lead to a decrease in aggregate expenditure, not an increase. Option C is also incorrect because households buying fewer new homes would only affect the investment component of aggregate expenditure, not the overall expenditure.

When Aggregate Expenditure Is More Than GDP,which of the Following