-In the above figure, if real GDP is below $15 trillion, inventories will be
A) below target levels, so firms will increase production.
B) below target levels, so firms will decrease production.
C) above target levels, so firms will increase production.
D) above target levels, so firms will decrease production.

Question

-In the above figure, if real GDP is below $15 trillion, inventories will be
A) below target levels, so firms will increase production. 
B) below target levels, so firms will decrease production. 
C) above target levels, so firms will increase production. 
D) above target levels, so firms will decrease production.

Quizplus · Accepted Answer

When real GDP is below $15 trillion, it indicates that the economy is producing less than its potential output. This situation typically leads to inventories falling below target levels because goods are being sold faster than they are produced. As a response, firms will increase production to replenish their inventories and meet the demand.

-In the Above Figure, If Real GDP Is Below $15