Assume that in a private closed economy, consumption is $240 billion and investment is $50 billion, both at the $280 billion level of domestic output. Thus,

A. saving is $10 billion.
B. unplanned decreases in inventories of $10 billion will occur.
C. the MPC is 0.80.
D. unplanned increases in inventories of $10 billion will occur.

ANSWER:

B. unplanned decreases in inventories of $10 billion will occur.