-Consider Figure 16.3 below,which shows changes in private inventories.Which of the following (approximate) dates are likely to be periods of recession? Given your analysis,inventories are __________.

Question

-Consider Figure 16.3 below,which shows changes in private inventories.Which of the following (approximate)dates are likely to be periods of recession? Given your analysis,inventories are __________.

Quizplus · Accepted Answer

Inventories are procyclical, meaning they tend to increase during periods of economic expansion and decrease during periods of economic contraction. During a recession, businesses typically reduce their inventories in order to cut costs. Therefore, the periods of recession are likely to be 2001 and 1980, when inventories decreased.