Assume that the demand for goods and services falls across the entire economy and for an extended period of time.If the prices are inflexible, the unintended increase in business inventories would force:
A)businesses to keep the production at the existing level.
B)businesses to increase the level of production.
C)businesses to lower the level of production.
D)businesses to increase the level of employment.

Question

Quizplus · Accepted Answer

With falling demand, businesses will see a buildup of unsold inventory. If prices are inflexible, they cannot adjust to clear these inventories. As a result, they will need to reduce production in order to avoid further buildup of inventories.

Assume That the Demand for Goods and Services Falls Across