Suppose that storage costs increase,so that firms decide to hold less output in inventory,other things constant.Which of the following is true?
A)consumption spending will increase
B)consumption spending will decrease
C)investment will increase
D)investment will decrease
E)GDP for this year is not affected

Question

Quizplus · Accepted Answer

If firms decide to hold less output in inventory due to increased storage costs, it means that they will be producing less and investing less in inventory. Therefore, investment will decrease.

Suppose That Storage Costs Increase,so That Firms Decide to Hold