Suppose the economy is at an equilibrium when C + I + G + X = $12 trillion. If the economy is currently at a real national income level of $14 trillion, then total planned real expenditures
A) exceed real Gross Domestic Product (GDP), and real Gross Domestic Product (GDP) will increase.
B) are less than real Gross Domestic Product (GDP), and real Gross Domestic Product (GDP) will decline.
C) are equal to real Gross Domestic Product (GDP), and there will be no change in real Gross Domestic Product (GDP).
D) are less than real Gross Domestic Product (GDP), and real Gross Domestic Product (GDP) will increase.

Question

Quizplus · Accepted Answer

Total planned real expenditures (C + I + G + X) being less than real GDP ($14 trillion) implies an excess supply of goods and services. This means that firms will have unsold inventory and will need to reduce production, which will result in a decline in real GDP.

Suppose the Economy Is at an Equilibrium When C