If aggregate output is less than planned spending, then
A) unplanned inventory investment is zero.
B) unplanned inventory investment is negative.
C) unplanned inventory investment is positive.
D) actual investment equals planned investment.

Question

Quizplus · Accepted Answer

When aggregate output is less than planned spending, it means that consumers are buying more than expected, leading to a decrease in inventories. This decrease in inventories is considered an unplanned inventory investment, which is negative because firms did not plan to reduce their inventories by that amount.

If Aggregate Output Is Less Than Planned Spending, Then