Question

Inventories held by firms Multiple Choice tend to increase the severity of short-run fluctuations. tend to reduce the severity of short-run fluctuations. are held by businesses because they are a costless way of responding to demand shocks. are the result of positive demand shocks.

Answer 1

The correct option is (a) tend to reduce the severity of short-run fluctuations.

The products and materials that a company keeps on hand with the intention of reselling, producing, or using them are referred to as inventory or stock. The main focus of inventory management is determining the location and shape of stocked commodities.

All the goods, merchandise, and supplies that a company keeps on hand in anticipation of selling them for a profit are referred to as inventory. Example: Only the newspaper will be regarded as inventory if a newspaper vendor utilizes a vehicle to distribute newspapers to clients. The car will be considered an asset.

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