Refer to Table 23-11. Using the table above, calculate the unplanned change in inventories for each level of GDP, and explain what will happen to GDP
What will be an ideal response?
The macroeconomic equilibrium is determined where aggregate expenditure = real GDP. The values for aggregate expenditure for each level of real GDP are given in the table below. The unplanned change in inventories is the difference between aggregate expenditure and real GDP. If there is an unplanned decrease in inventories, firms are selling goods faster than they planned, and this is a signal for firms to increase production. If there is an unplanned increase in inventories, firms are selling goods more slowly than they expected, and this is a signal for firms to decrease production.
Real GDP Aggregate Expenditure Unplanned Change in Inventories Real GDP will...
$5,000 $5,200 -$200 increase
6,000 6,000 0 be in equilibrium
7,000 6,800 200 decrease
8,000 7,600 400 decrease
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