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)saving
B)unplanned inventory change
C)planned investment
D)marginal propensity to save
E)marginal propensity to consume

Question

Quizplus · Accepted Answer

The distance between the aggregate expenditure line and the 45-degree line represents the unplanned inventory change. When the aggregate expenditure line is above the 45-degree line, it indicates that firms are producing more than what is being demanded, leading to unplanned inventory accumulation. Conversely, when the aggregate expenditure line is below the 45-degree line, it indicates that firms are producing less than what is being demanded, leading to unplanned inventory depletion.

Which of the Following Is Illustrated by the Distance Between