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Question
When aggregate demand is greater than aggregate supply, inventories:
When aggregate demand is greater than aggregate supply, inventories:
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Solution
The correct option is A Fall
When Aggregate demand is more than
Aggregate supply, then the planned inventory would fall below the desired
level as the demand is more than the supply in the market. To bring back the Inventory at the desired level, the producers expand
the output More output means more income. Rise in output means rise in AS
and rise in income means rise in AD.
When Aggregate demand is more than Aggregate supply, then the planned inventory would fall below the desired level as the demand is more than the supply in the market. To bring back the Inventory at the desired level, the producers expand the output More output means more income. Rise in output means rise in AS and rise in income means rise in AD.
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