Firms React to Unplanned Increases in Inventories by

question 63

Multiple Choice

Firms react to unplanned increases in inventories by

• A) reducing output.
• B) increasing output.
• C) increasing planned investment.
• D) increasing consumption.

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Definitions:

The Classicals

Refers to the classical economists, a group that primarily includes thinkers like Adam Smith, David Ricardo, and John Stuart Mill, who focused on the ideas of free markets, the theory of comparative advantage, and the role of government.

Short Run

A period in economics during which some factors of production are fixed, typically under a year, making some adjustments impossible or difficult.

Long Run

A period in economics where all factors of production and costs are variable, allowing companies and industries to adjust to market changes.

Aggregate Supply Analyses

The assessment of the total supply of goods and services that firms in an economy plan on selling during a specific time period at different price levels.