Author Question: How do firms respond to unplanned inventory changes? What is the effect on their production and GDP? ... (Read 105 times)

nmorano1 · **on:** Jun 29, 2018

How do firms respond to unplanned inventory changes? What is the effect on their production and GDP?

What will be an ideal response?

Question 2

In 2008 the fall in the value of the stock market decreased people's wealth. As a result of this change alone, the supply of loanable funds

A) did not change, and there was a downward movement along the supply of loanable funds curve.
B) did not change, and there was an upward movement along the supply of loanable funds curve.
C) decreased.
D) did not change, and there was no movement along the supply of loanable funds curve.
E) increased.

Silverbeard98 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

If inventories are above their target levels, that is, more than planned, firms decrease their production. As a result, GDP decreases. Conversely, if inventories are below their target levels, that is, less than planned, firms increase their production. In this case, GDP increases.

Answer to Question 2

E