The data below are for a private (no government) closed economy. All figures are

Question

The data below are for a private (no government) closed economy. All figures are in billions of dollars. Refer to the table below. If planned investment is $15 billion, then at the $560 billion level of output, there will be a(n). unplanned increase in inventories of $5 billion Unplanned increase in inventories of $10 billion Unplanned decrease in inventories of $5 billion Unplanned decrease in inventories of $10 billion The short-run aggregate supply curve shows the inverse relationship between the price level and real GDP purchased inverse relationship between the price level and real GDP produced Direct relationship between the price level and real GDP purchased

Explanation / Answer

1. Aggregate Demand = Consumption + Investment

= 555 + 15 = $570 billion

Income = $560 million

AD > Y, SO, there will be unplanned decline in inventories of 570 - 560 = 10 billion

Option D.

2. Option C Direct relation between price level and real GDP produced.

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