Pls asap ### Question 28Suppose that there is no government and no international trade. When C + I (or AE) is greater than the level of real GDP (or Aggregate output):- ⃝ Unplanned inventories equal zero, and there is no change in the level of real GDP.- ⃝ Unplanned inventories increase, and real GDP contracts.- ⃝ Real planned investment spending equals real planned saving.- ⃝ Unplanned inventories decrease, and real GDP expands.#### Explanation:In this question, you are asked to determine the economic implications when the sum of consumption (C) and investment (I), also referred to as aggregate expenditure (AE), exceeds the level of real GDP. Each option provides a different scenario regarding the relationship between inventories and real GDP.1. **Unplanned inventories equal zero, no change in real GDP**: This suggests that all produced goods are sold as expected, keeping inventories stable, implying a balanced economic condition without any change in GDP.2. **Unplanned inventories increase, and real GDP contracts**: If there is an excess in production (or under-consumption), inventories increase, indicating an overestimation of demand, potentially leading to a decrease in future production and contraction in GDP.3. **Real planned investment spending equals real planned saving**: This relates to the equilibrium condition in the classical model where total investment matches total saving, a typical assumption in a steady state.4. **Unplanned inventories decrease, and real GDP expands**: If AE exceeds GDP, it suggests higher demand than supply, leading to depletion of inventories and signaling a need for increased production, thus, expanding GDP.Understanding these scenarios helps in grasping fundamental economic principles regarding equilibrium, demand-supply dynamics, and GDP fluctuations.

The aggregate expenditure is the sum of the consumption, government expenditure, planned investment,…

Suppose that there is no government and no international trade. When C + I (or AE)greater than the level of real GDP(or Aggregate output) O unplanned inventories equal zero, and there is no change in the level of real GDP. O unplanned inventories increase, and real GDP contracts. O real planned investment spending equals real planned saving. O unplanned inventories decrease, and real GDP expands.

Suppose that there is no government and no international trade. When C + I (or AE)greater than the level of real GDP(or Aggregate output) O unplanned inventories equal zero, and there is no change in the level of real GDP. O unplanned inventories increase, and real GDP contracts. O real planned investment spending equals real planned saving. O unplanned inventories decrease, and real GDP expands.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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