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Unformatted text preview: , this means that the actual production is insufficient. Therefore, inventories decrease. When inventories decrease, the producers are induced to produce more in order to make up for inventories liquidating. Is it possible to spend more than the amount produced? Yes, we can spend more the amount produced by borrowing or liquidating our real or financial assets. So, GDP increase. When DI>AE , the goods produced cannot be sold. So, inventories increase. When inventories increase, producers stop producing. GDP goes down. And finally the economy comes to equilibrium point . But, this point may be under the full capacity level and the economy may stay at this point for a long time....
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This note was uploaded on 01/01/2012 for the course MIS 132 taught by Professor Hasandag during the Spring '11 term at Kadir Has Üniversitesi.
- Spring '11