Question

Are the unplanned changes in inventories rising, falling, or constant at equilibrium GDP? Explain

Are the unplanned changes in inventories rising, falling, or constant at equilibrium GDP? Explain

Homework Answers

Answer #1

The GDP at equilibrium levels is the output which is planned and expenditure exactly matches this output level. All the parts of GDP viz consumer goods, services, government purchase and investment are already planned and equalize with the expenditure, due to which is no unplanned inventory. Since there is no unplanned inventory, hence its level remains unchanged or stays constant. There is no unplanned investment activity and no unplanned inventory level fluctuations occur ; so the unplanned changes in inventories are constant.

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