Desired Level of the Capital Stock
-Consider the two graphs above.Suppose that firms are able to use inventories as collateral for low-interest loans.This would ________ the desired level of inventories,as depicted in graph ________.
A)increase;B
B)increase;A
C)decrease;B
D)decrease;A

Question

Desired Level of the Capital Stock 
-Consider the two graphs above.Suppose that firms are able to use inventories as collateral for low-interest loans.This would ________ the desired level of inventories,as depicted in graph ________.
A)increase;B 
B)increase;A 
C)decrease;B 
D)decrease;A

Quizplus · Accepted Answer

Using inventories as collateral for low-interest loans makes holding inventories more attractive, increasing the desired level of inventories, which is depicted in graph B.