Which of the following is illustrated by the distance between the aggregate expenditure line and the 45-degree line at each level of real GDP?
A)The level of saving in an economy
B)Unplanned inventory change
C)Planned investment undertaken in an economy
D)The marginal propensity to save
E)The marginal propensity to consume

Question

Quizplus · Accepted Answer

The distance between the aggregate expenditure line and the 45-degree line at each level of real GDP represents unplanned inventory change. If the aggregate expenditure line is above the 45-degree line, it indicates that firms are selling more goods than they have intended to produce, which leads to a decrease in inventories. If the aggregate expenditure line is below the 45-degree line, it indicates that firms are selling fewer goods than they have intended to produce, which leads to an increase in inventories.

Which of the Following Is Illustrated by the Distance Between