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Author Question: A country reports that it has an unplanned inventory increase of 1.0 trillion. Discuss how the ... (Read 78 times)

geoffrey

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on: Jun 29, 2018
A country reports that it has an unplanned inventory increase of 1.0 trillion. Discuss how the economy adjusts until it reaches an unplanned inventory change of 0.0 trillion.
 
  What will be an ideal response?

Question 2

When ________ changes, the supply of loanable funds curve shifts.
 
  A) the price level
  B) animal spirits
  C) people's expected future income
  D) the expected rate of profit
  E) investment


abro1885

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Reply #1 on: Jun 29, 2018
Answer to Question 1

When unplanned inventory changes are positive, real GDP exceeds aggregate planned expenditures. There is an inventory buildup, so firms decrease production and as a result real GDP decreases. Firms continue to decrease production until real GDP equals aggregate planned expenditures and unplanned inventory changes equal zero.

Answer to Question 2

C


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