Consumption spending is $5 million,planned investment spending is $8 million,actual investment spending is $8 million,government purchases are $10 million,and net export spending is $2 million.Based on this information,which of the following is true?
A)There was an unplanned change in inventories.
B)Aggregate expenditure is equal to GDP.
C)Aggregate expenditure is greater than GDP.
D)Aggregate expenditure is less than GDP.

Question

Quizplus · Accepted Answer

Aggregates expenditure is the sum of consumption spending, planned investment spending, government purchases, and net export spending. Therefore, Aggregate expenditure = $5 million (Consumption spending) + $8 million (Planned investment spending) + $10 million (Government purchases) + $2 million (Net export spending) = $25 million.   Since nothing is mentioned regarding the unplanned change in inventories, we can assume that there was no unplanned change. GDP is defined as the total value of goods and services produced in an economy, and since Aggregate expenditure equals GDP, the answer is B.

Consumption Spending Is $5 Million,planned Investment Spending Is $8 Million,actual