-In the above figure, if real GDP is greater than $300 billion, inventories will be
A) below target levels so firms decrease production.
B) above target levels so firms decrease production.
C) below target levels so firms increase production.
D) above target levels so firms increase production.

Question

-In the above figure, if real GDP is greater than $300 billion, inventories will be
A) below target levels so firms decrease production. 
B) above target levels so firms decrease production. 
C) below target levels so firms increase production. 
D) above target levels so firms increase production.

Quizplus · Accepted Answer

When real GDP is greater than $300 billion, it implies that production has exceeded the level of aggregate demand, leading to an accumulation of inventories above target levels. As a result, firms will decrease production to bring inventories back to target levels.

-In the Above Figure, If Real GDP Is Greater Than