FIGURE 11-4: The Adjustment to Equilibrium in the Keynesian Cross If firms are producing at level Y1, then planned expenditure PE1 falls short of production, and firms accumulate inventories. This inventory accumulation induces firms to decrease production. Similarly, if firms are producing at level Y2, then planned expenditure PE2 exceeds production, and firms run down their inventories. This fall in inventories induces firms to increase production. In both cases, the firms’ decisions drive the economy toward equilibrium.