Suppose that firms find that their inventories are less than ...

[bcretired]

Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?
 
  What will be an ideal response?

Question 2

If expected future income increases, then
 
  A) the supply of loanable funds increases.
  B) the quantity of loanable funds supplied decreases.
  C) the supply of loanable funds decreases.
  D) the demand for loanable funds decreases.
  E) the quantity of loanable funds demanded increases.

[ju]

Answer to Question 1

If inventories are less than planned, aggregate planned expenditure exceeds real GDP. In order to restore their inventories to their desired levels, firms will increase their production. As a result, real GDP increases. Inventories remain less than planned and real GDP continues to increase until eventually real GDP reaches its equilibrium level, at which point actual and planned inventories are equal.

Answer to Question 2

C

[bcretired]

YES! Correct, THANKS for helping me on my review

[parshano]

Wow, this really help