The food processing industry in Richland accounts for 20 percent of its GDP.Which of the following will happen if firms in this industry become pessimistic about the future demand for their products? Assume that consumption and government expenditure remain unchanged.
A) Richland's GDP will fall.
B) Richland's inflation rate will increase.
C) Richland's unemployment rate will fall.
D) Richland's interest rate will increase.

Question

Quizplus · Accepted Answer

If firms in the food processing industry become pessimistic about future demand, they may reduce their production levels, leading to a fall in their contribution to Richland's GDP. This, in turn, can bring down the overall GDP of Richland. Therefore, option A is the correct choice. The other options are not relevant to the given scenario.

The Food Processing Industry in Richland Accounts for 20 Percent