If aggregate quantity demanded exceeds aggregate quantity supplied, we can expect an unplanned
A)depletion of inventories, causing firms to raise prices.
B)depletion of inventories, causing firms to lower prices.
C)accumulation of inventories, causing firms to raise prices.
D)accumulation of inventories, causing firms to lower prices.

Question

Quizplus · Accepted Answer

If aggregate quantity demanded exceeds aggregate quantity supplied, it means that there is a shortage in the market. This shortage leads to a depletion of inventories as firms try to meet the excess demand by selling off their existing inventories. As inventories decrease, firms may raise prices to maintain their profit margins.

If Aggregate Quantity Demanded Exceeds Aggregate Quantity Supplied, We Can