If an Unplanned Increase in Business Inventories Occurs

question 208

Multiple Choice

If an unplanned increase in business inventories occurs:

• A)we can expect aggregate production to be unaffected.
• B)we can expect businesses to increase the level of production.
• C)we can expect businesses to lower the level of production.
• D)aggregate expenditures must exceed the domestic output.

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Definitions:

Marginal Cost

The incremental cost of producing an additional unit of a good or service.

Marginal Revenue

The additional revenue gained from selling one more unit of a product or service.

Downward-Sloping Demand

Describes a market phenomenon where a product's demand decreases as its price increases, according to the law of demand.

Price

The expenditure involved in buying a good or service.