When planned aggregate expenditure is less than real GDP, as in the diagram to the right, what happens to firms' inventories? OA. Inventories fall as firms increase output. B. Inventories accumulate as firms increase production. C. Inventories fall if production is not scaled back. D. Inventories accumulate if production is not scaled back. 100- Real Aggregate Expenditure, AE ($100 billions) 40- 7 8 9 8 8 8 8 8 20- 30- 50- -0 0 45 10 20 30 40 50 60 70 80 90 100 Real GDP, Y ($100 billions) Y = AE

ECON MACRO
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ISBN:9781337000529
Author:William A. McEachern
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Chapter9: Aggregate Demand
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When planned aggregate expenditure is less than real GDP, as in the diagram to
the right, what happens to firms' inventories?
OA. Inventories fall as firms increase output.
B. Inventories accumulate as firms increase production.
C. Inventories fall if production is not scaled back.
D. Inventories accumulate if production is not scaled back.
100-
Real Aggregate Expenditure, AE ($100 billions)
40-
7 8 9 8 8 8 8 8
20-
30-
50-
-0
0
45
10 20 30 40 50 60 70 80 90 100
Real GDP, Y ($100 billions)
Y = AE
Transcribed Image Text:When planned aggregate expenditure is less than real GDP, as in the diagram to the right, what happens to firms' inventories? OA. Inventories fall as firms increase output. B. Inventories accumulate as firms increase production. C. Inventories fall if production is not scaled back. D. Inventories accumulate if production is not scaled back. 100- Real Aggregate Expenditure, AE ($100 billions) 40- 7 8 9 8 8 8 8 8 20- 30- 50- -0 0 45 10 20 30 40 50 60 70 80 90 100 Real GDP, Y ($100 billions) Y = AE
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