"Few If Any Economists Anticipated the Extent of the Inventory

question 45

Multiple Choice

"Few if any economists anticipated the extent of the inventory adjustment... Production cutbacks have been much greater than expected. Those cuts have weakened the industrial sector considerably." As a result of these changes, the U.S. government lowered its estimate of fourth-quarter growth in real GDP. www.businessweek.com 3/12/2007
The article suggests that

• A) planned expenditures exceeded real GDP in 2006.
• B) real GDP exceeded planned expenditures in 2006.
• C) the AE curve shifted upward in 2007.
• D) the AD curve shifted rightward in 2007.

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Definitions:

Early Payment Discount

An incentive offered by a seller to a buyer for paying a bill before the due date.

Grants Credit

The offering of deferred payment terms or a line of credit to a buyer for the purchase of goods or services.

Cash Increase

An upward movement in a company's cash balance, indicating improved liquidity or additional inflow of money.

Operational Cycle

The period between the acquisition of inventory by a company and the collection of payments for the goods or services sold.