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does inventory stock increase beyond the desired level when aggregate demand is more than aggregate supply in an economy

Dear Student
If aggregate demand(AD)is more than aggregate supply(AS),then economy is not in equilibrium because an economy is in equilibrium when AD=AS. In the following figure,AD equilibrium is struck at point E where AD=AS.At point E1,aggregate demand is more than aggregate supply then it means that buyers are planning to buy more goods and services than producers are planning to produce(i.e.,supply). Producers keep a certain ready stock of goods called "inventory'.When AD is greater than AS,it means that buyers are buying faster than sellers are expecting.In this situation,inventories start falling and come below the desired level.To bring back the inventories at the desired level producers expand production.This raises the income level which keeps on rising till the AD and the AS once again become equal, corresponding to point E in the diagram.Thus,the economy will come back to state of equilibrium.

So, we can conclude that for bringing equilibrium back we have to increase the inventory by producing more goods.

Regards

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when ad is greater than as - it means buyers are planning to buy more goods than produces are planning to produce. it means planned demand is more than planned output. as the result, planned inventory Falls below the desired level (producers keep a certain ready stock of goods which is called inventory) .
to bring back the inventory at the desired level the firms will produce more. this increases the aggregate output. the process continues till ad is equal to output produced in the economy( AD= AS or I= S). Thus, when ad is greater than as then income and Employment increases.
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