Why Is Stockpiling Inventories When Faced with the Threat of Devaluation

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Examlex · Accepted Answer

The Answer is The prospects of a depreciation of a local currency are insufficient in and of themselves to warrant an increase in inventories.Only by balancing the anticipated marginal benefits and anticipated marginal costs of holding the inventory can we arrive at the optimal stock.What will happen to future retail prices and whether nominal interest rates accurately and rationally reflect the probabilities of devaluation are equally as important as the fact that the local currency is expected to depreciate.

Why Is Stockpiling Inventories When Faced with the Threat of Devaluation

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