If inventory stocks are ________ and firms have enough capital and labor to support an output increase, monetary and fiscal policy will be ________.

Question

Quizplus · Accepted Answer

When inventory stocks are low, it suggests that demand is high, and firms may have the capacity to increase output. In this situation, monetary and fiscal policy will be very effective in boosting demand further and stimulating the economy. On the other hand, if inventory stocks are high, it implies weak demand, and an increase in supply may not lead to increased sales, so monetary and fiscal policy may be ineffective.

If Inventory Stocks Are ________ and Firms Have Enough Capital