Inventory Levels Unexpectedly Rise and as a Result Firms Reduce

question 4

Multiple Choice

Inventory levels unexpectedly rise and as a result firms reduce the level of production.Which of the following is consistent with these two occurrences?

• A) TP is greater than TE.
• B) TP is less than TE.
• C) TP is equal to TE.
• D) TP is equal to TE minus the rise in inventories above the optimum inventory level.
• E) none of the above

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Definitions:

Simple Interest

Simple interest is a method of calculating the interest charge on a loan based on the original principal balance without compounding.

Rate of Return

The financial improvement or decline in an investment across a particular period, indicated as a percentage of the investment’s entry cost.

Interest

The fee associated with the right to borrow funds, usually indicated as a yearly percentage rate.

Compounded Annually

This refers to the process of calculating interest on both the initial principal and the accumulated interest from previous periods on a yearly basis.