Question

Which factor will cause a decrease in unplanned inventory investment?

a. an increase in the growth rate of real GDP
b. a sudden decrease in consumer wealth
c. an increase in interest rates
d. an unexpected increase in consumer spending

Answer 1

D) an unexpected increase in consumer spending

Step-by-step explanation:

If aggregate consumer spending increases more than expected, then the corporations will sell more products and eventually their inventories will decrease because of this increase in the sales volume. Companies usually budget their production levels considering a certain sales volume, but when that sales volume is much higher than expected shortages might occur. Shortages are always negative, but this is the best shortage you can have, since you sold most of your inventory.