If real GDP exceeds aggregate planned expenditure, what happens to a firm's unplanned inventories?
What will be an ideal response?
If real GDP exceeds aggregate planned expenditure, firms are producing more goods and services than households, firms, and governments are planning to buy. As a result, firms will not be able to sell all of their production. The unsold amounts will wind up in their inventories and so unplanned inventory increases.
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A variable factor of production:
A. is fixed in the long run but variable in the short run. B. is variable in both the short run and the long run. C. plays no role in the law of diminishing marginal returns. D. is variable only in the short run.
In Figure 12.6, airline Fly Smart is initially a secure monopoly between two cities X and Y at point M, serving 300 passengers per day at the profit maximizing price of $300 per ticket. Suppose that Fly Smart discovers that a second airline is contemplating entering the market. If the minimum market entry quantity is 130 passengers per day, what is Fly Smart's profit when it commits to the entry-deterring quantity?
A. $60,000 B. $44,400 C. $33,600 D. $29,600
Increased liquidity in the banking system occurs when ________
A) people buy more bonds B) the demand for real money balances declines C) banks buy more bonds from the central bank D) all of the above E) none of the above
Which of the following is an important cause of inflation in an economy?
a. increases in productivity in the economy b. the influence of positive externalities on the economy c. lack of property rights in the economy d. growth in the quantity of money in the economy