If aggregate expenditure is more than GDP,then inventories fall and GDP rises.

Question

Quizplus · Accepted Answer

If aggregate expenditure is more than GDP, then it means there is a higher demand for goods and services than what the economy can currently supply. To meet this demand, companies will need to sell more goods than they produce as their inventories start to deplete. To make up for the difference, companies will need to increase production to meet demand which eventually leads to an increase in GDP.

If Aggregate Expenditure Is More Than GDP,then Inventories Fall and GDP