Suppose That Inventories Are Rising

question 98

Multiple Choice

Suppose that inventories are rising. We can expect that, in the future,

• A) real GDP will likely increase
• B) real GDP will likely decrease.
• C) real GDP could increase or decrease, as its direction cannot be predicted based on inventories.
• D) firms will raise prices of their goods and services.

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Definitions:

Credit Memo

A credit memo is a document issued by a seller to a buyer, reducing the amount that the buyer owes the seller under the terms of an earlier invoice.

Perpetual Inventory System

An accounting method that records the sale or purchase of inventory immediately through computerized point-of-sale systems and Enterprise Resource Planning systems.

Periodic Inventory System

An inventory accounting system where updates to inventory levels are made at specific intervals, rather than continuously.

Purchases Discounts

Purchases discounts are reductions in price given by suppliers to buyers for early payment of invoices.