What is the effect on inventories, GDP, and employment when aggregate expenditure (total spending) exceeds GDP?

A. Inventories increase, GDP increases, and employment increases.

B. Inventories decrease, GDP increases, and employment increases.

C. Inventories increase, GDP increases, and employment decreases.

D. Inventories decrease, GDP decreases, and employment increases.

B. Inventories decrease, GDP increases, and employment increases

Explanation:

The full form GDP is Gross Domestic Product. It is the measure of the economy of a particular country. GDP may be defined as the total services or goods produced in that particular country. GDP is time specific, it is measured within a given time.

The fiscal policy framed by the government affects the total produce as well as the total expanses in a country. All this in turn affects the employment and income of the people. It also affects the GDP greatly.

Thus when then aggregate expenditure or the total spending of the government exceeds the GDP of a country, the inventories decrease, GDP increases and also the employment increases in the country.

Thus the answer is

B. Inventories decrease, GDP increases, and employment increases