If an Unintended Increase in Business Inventories Occurs

question 115

Multiple Choice

If an unintended 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:

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit costs and opportunity costs.

Perfectly Competitive

A market structure where many firms sell identical products, entry and exit are easy, and no single seller can influence the market price.

Market Price

The present cost for purchasing or selling an asset or service within a specific market.

Minimum-Cost Output

The level of production at which a firm can produce goods at the lowest possible average total cost.