Inventory levels unexpectedly rise and as a result firms reduce the level of production.Which of the following is consistent with these two occurrences?
A) TP is greater than TE.
B) TP is less than TE.
C) TP is equal to TE.
D) TP is equal to TE minus the rise in inventories above the optimum inventory level.
E) none of the above

Question

Quizplus · Accepted Answer

When total production (TP) is greater than total expenditure (TE), it leads to an unexpected rise in inventory levels, prompting firms to reduce production to align with demand.

Inventory Levels Unexpectedly Rise and as a Result Firms Reduce