Unintended Changes in Inventories

question 26

Multiple Choice

Unintended changes in inventories

• A) cause the economy to move away from the equilibrium GDP.
• B) are treated as components of consumption.
• C) bring actual investment and saving into equality only at the equilibrium level of GDP.
• D) bring actual investment and saving into equality at all levels of GDP.

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Definitions:

Fallacy of Composition

The error of assuming that what is true of a part is necessarily true of the whole.

Prosperity

A state of economic well-being characterized by high levels of income, employment, and production.

Depression

A severe and prolonged reduction in economic activity as occurred during the 1930s

Scarce Resources

Natural, human, and capital resources that are limited in supply, which necessitates choices about how they are allocated.