According to the aggregate expenditure model, when faced with unwanted inventory firms
A) are forced to go out of business.
B) decrease production.
C) immediately cut prices.
D) increase production.
E) do nothing and wait for equilibrium to be restored.

Question

Quizplus · Accepted Answer

According to the aggregate expenditure model, firms decrease production when faced with unwanted inventory in order to avoid further accumulation of inventory. This can happen due to a decrease in overall demand or an increase in production costs.

According to the Aggregate Expenditure Model, When Faced with Unwanted