If Real GDP Is $3 Billion and Aggregate Planned Expenditure

question 112

Multiple Choice

If real GDP is $3 billion and aggregate planned expenditure is $3.5 billion, then inventories

• A)increase and productions increases.
• B)increase and production decreases.
• C)decrease and production increases.
• D)decrease and production decreases.
• E)remain the same and production decreases.

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Definitions:

Firms' Expectations

The outlook or anticipations of businesses regarding future economic conditions, sales, and profitability, which can influence their investment and production decisions.

Nominal Wage Rates

The amounts of money paid to workers before adjustments for inflation.

Price Level

A measure of the average prices of goods and services in an economy at a given time, often reflected in a price index.

Real Wages

Wages adjusted for inflation, reflecting the true purchasing power of the earnings of the workforce.