When a firm sells a product out of inventory, investment expenditures ______ and consumption expenditures ______.
A) increase; decrease
B) decrease; increase
C) decrease; remain unchanged
D) remain unchanged; increase

Question

Quizplus · Accepted Answer

When a firm sells a product out of inventory, it does not require any further investment expenditures as the inventory has already been purchased. However, the sale generates revenue, which increases consumption expenditures. Therefore, investment expenditures decrease, and consumption expenditures increase.

When a Firm Sells a Product Out of Inventory, Investment