If Prices Are Fixed, When Aggregate Planned Expenditure Exceeds Real

question 344

Multiple Choice

If prices are fixed, when aggregate planned expenditure exceeds real GDP, then

• A) inventories decrease, signaling firms to increase production and increase real GDP.
• B) inventories increase, signaling firms to decrease production and decrease real GDP.
• C) profits fall, signaling firms to decrease production and decrease real GDP.
• D) None of the above answers are correct.

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Definitions:

Sales Journal

A specialized accounting journal that records the company's sales transactions, typically on credit.

Gross Profit

The difference between revenue and the cost of goods sold before deducting overheads, payroll, taxation, and interest payments.

Accounts Receivable

Money owed to a company by its debtors for goods or services that have been delivered or used but not yet paid for.

Purchases

Merchandise for resale. It is a cost.