Firms Have Inventories That They Can Draw Down to Meet

question 336

Multiple Choice

Firms have inventories that they can draw down to meet an increase in demand. This will

• A) have no effect on the multiplier, because the MPC remains unchanged.
• B) increase the size of the multiplier, because firms will be able to respond more quickly to a change in demand.
• C) decrease the size of the multiplier, because output will not immediately respond to changes in demand.
• D) either increase or decrease the multiplier, depending on the size of the MPC.

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Definitions:

Health Psychology

A subfield of psychology that provides psychology’s contribution to behavioral medicine.

Medical Psychology

A branch of psychology that studies the biopsychosocial factors affecting health and illness, and applies psychological principles to promote health and well-being.

Behavioral Medicine

A multidisciplinary field that integrates behavioral, psychosocial, and medical knowledge to understand, prevent, and treat physical illness.

Psychobiology

A field of science that studies how biological processes influence behaviors, thoughts, and emotions.