"If Aggregate Planned Expenditure Exceeds Real GDP, Then Aggregate Expenditure

question 368

Essay

"If aggregate planned expenditure exceeds real GDP, then aggregate expenditure and real GDP will increase." Explain whether the previous sentence is correct or incorrect.

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Definitions:

Shortage

A situation in which the demand for a product or service exceeds its supply in a market.

Accounting Profits

The total revenue of a company minus the explicit costs and depreciation.

Normal Profits

The return to the business owners for the opportunity cost of their implicit inputs.

MRP

Marginal Revenue Product, a term in economics that represents the additional revenue generated by employing one more unit of a factor, such as labor or capital.