If the economy experiences an unplanned inventory accumulation at the full employment level of GDP, then the economy is in a(n)
A)inflationary gap.
B)hyperinflation.
C)recessionary gap.
D)full employment gap.

Question

Quizplus · Accepted Answer

An unplanned inventory accumulation means that businesses have produced more goods than consumers are willing to buy. This leads to a decrease in demand for goods, causing businesses to reduce production and possibly lead to layoffs. This decrease in output causes a recessionary gap, where the economy is producing below its full employment level.

If the Economy Experiences an Unplanned Inventory Accumulation at the Full