Question

At the current GDP level, inventories are rising. What does this mean in terms of the relationship between aggregate expenditures and GDP, leakages and injections, and would we expect GDP to ise or fall in the future?

Answer 1

Step-by-step explanation:

If at the current GDP level inventories are rising, that means firms are spending more to stock up on inventories.

What does this mean, in terms of the relationship between aggregate expenditures and GDP?

- The information provided in the question shows that aggregate expenditure is on the rise; as firms' spending is increasing.

What does this mean in terms of the relationship between leakages and injections?

- This situation means that the level of injection of money into the economy is rising; probably faster than withdrawal rate.

Would you expect GDP to rise or fall in the future?

- You should expect GDP (Gross Domestic Product) to rise in the future. This is because a greater level of spending in the economy will lead to a higher amount of gross (overall) domestic (within the country) product!