Exhibit 9-11 -In Exhibit 9-11,which of the following best describes the situation at GDP₁? A)Equilibrium GDP B)Inventories are falling and real GDP will increase. C)Inventories are falling and real GDP will decrease D)Inventories are rising and real GDP will increase E)Inventories are falling and real GDP will decrease

Question

Quizplus · Accepted Answer

In Exhibit 9-11, we can see that at GDP₁, the output gap is negative, which means that actual GDP is less than potential GDP. However, inventories are falling, indicating that businesses are selling more goods than they are producing. This suggests that they will have to increase production in the future to restock their inventories, leading to an increase in real GDP. Therefore, the best description of the situation is that inventories are falling and real GDP will increase.

Exhibit 9-11 -In Exhibit 9-11,which of the Following Best Describes the Situation