If aggregate quantity supplied exceeds aggregate quantity demanded, we can expect an unplanned
A)depletion of inventories, causing firms to raise prices.
B)depletion of inventories, causing firms to lower prices.
C)accumulation of inventories, causing firms to raise prices.
D)accumulation of inventories, causing firms to lower prices.

Question

Quizplus · Accepted Answer

An accumulation of inventories occurs when firms are producing more than what is being demanded by consumers. This excess supply can lead to a decrease in prices as firms try to clear their inventories. Therefore, the best choice is D: accumulation of inventories, causing firms to lower prices.

If Aggregate Quantity Supplied Exceeds Aggregate Quantity Demanded, We Can