Question

Rising inventories usually indicate an: a. economy that grows unexpectedly. b. economy that slows unexpectedly. c. unexpected spurt in sales. d. inflationary cycle.

Answer 1

Answer:

Option (b) is correct.

Explanation:

When the economy of a particular nation slows down, then as a result this will decreases the sales of the firms. Due to the economy slow down, the income of the consumers falls and as a result they won't be able to buy as much quantity of the goods as they want. Hence, the firms are left with large amount of output or we can say that inventories, as firms are not be able to sell all of their output to the potential buyers.