Assume That the Demand for Goods and Services Falls Across

question 21

Multiple Choice

Assume that the demand for goods and services falls across the entire economy and for an extended period of time.If the prices are inflexible, the unintended increase in business inventories would force:

• A)businesses to keep the production at the existing level.
• B)businesses to increase the level of production.
• C)businesses to lower the level of production.
• D)businesses to increase the level of employment.

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Definitions:

Interest Rate

The cost of borrowing money expressed as a percentage of the total amount loaned, paid by the borrower for the use of funds.

Equilibrium Interest

The interest rate at which the quantity of loanable funds demanded equals the quantity supplied, balancing savings and borrowing.

Loanable Funds

The money available for borrowing in the financial markets, influenced by interest rates and economic conditions.

Useful Life

The period during which an asset is expected to be usable for its intended purpose.