Country A specializes in the production of automobiles, and 45 percent of its population works in the automobile manufacturing industry. A sharp increase in the world prices of automobiles led to a boom in the automobile manufacturing industry in Country A. However, the automobile manufacturers overestimated the demand for automobiles. This led to overproduction, which resulted in a large stock of unsold cars. Which of the following is likely to happen in the near future?
A) The unemployment rate in Country A will increase.
B) Household consumption in Country A will increase.
C) Investment in Country A will increase.
D) The supply of credit in Country A will increase.

Question

Quizplus · Accepted Answer

Given that a significant portion of Country A's population is employed in the automobile manufacturing industry, overproduction and the resulting stock of unsold cars would likely lead to cutbacks in production. This, in turn, could lead to layoffs or reduced working hours, thereby increasing the unemployment rate.

Country a Specializes in the Production of Automobiles, and 45