Suppose that inventories are falling. We can expect that, in the future,
A) unemployment will likely increase.
B) unemployment will likely decrease.
C) unemployment could increase or decrease, as its direction cannot be predicted based on inventories.
D) real GDP will likely decrease.

Question

Quizplus · Accepted Answer

Falling inventories suggest that businesses are selling goods faster than they are producing them. This means that production will need to increase in order to keep up with demand, and businesses may need to hire more workers to meet this increased demand. As a result, unemployment is likely to decrease. Additionally, as production and demand increase, real GDP is likely to increase rather than decrease.

Suppose That Inventories Are Falling