"If aggregate planned expenditure exceeds real GDP, then aggregate expenditure and real GDP will increase." Explain whether the previous sentence is correct or incorrect
What will be an ideal response?
The sentence is correct. If aggregate planned expenditure exceeds real GDP, then firms find that their inventories are being decreased more than planned. As a result, firms increase production in order to restore their inventories back to their planned levels. When firms increase their production of goods and services, real GDP increases.
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A bushel of apples costs $15.00 in the U.S. The same apples cost 1,600 yen in Japan. If the exchange rate is 80 yen per dollar, is there a possibility for arbitrage? Explain and defend your answer. As part of your defense, find the real exchange rate
Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are
$.60 per bottle and $.40 per bag respectively. It can be concluded that: A. the two commodities are substitute goods. B. Mrs. Arnold should spend more on pretzels and less on soda. C. Mrs. Arnold should spend more on soda and less on pretzels. D. Mrs. Arnold is buying soda and pretzels in the utility-maximizing amounts.