Suppose the equilibrium level of expenditure is $13 trillion. If real GDP is $14 trillion, then planned expenditures

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Quizplus · Accepted Answer

If planned expenditures are less than real GDP, this means that there is an unplanned increase in inventories for firms. To reduce inventory, firms will decrease production, which means real GDP will decrease. This will continue until the level of planned expenditures equals the level of real GDP, which is the equilibrium level.

Suppose the Equilibrium Level of Expenditure Is $13 Trillion