Posted by Lindsey on Wednesday, February 2, 2011 at 6:41pm.
Fill in the blanks below with ↑ to indicate an increase in the variable or with ↓ to indicate a decrease in the variable. Answer the questions with a brief written response.
A) Consumption > Production ⇒ Economy is Out of Equilibrium ⇒ Inventories __ ⇒ Prices must __ or Production must __ to Restore Equilibrium ⇒ Inventories __ ⇒ Consumption = Production ⇒ Economy is back in Equilibrium
Under what conditions is price more likely to change than production to restore equilibrium in this situation?
B) Consumption__Production ⇒ Economy is Out of Equilibrium ⇒ Inventories__⇒ Prices must__ or Production must ↑ to Restore Equilibrium ⇒ Inventories__⇒ Consumption = Production ⇒ Economy is back in Equilibrium
Under what conditions is production more likely to change than price to restore equilibrium in this situation?
C) Consumption < Production ⇒ Economy is Out of Equilibrium ⇒ Inventories__ ⇒ Prices must__ or Production must__ to Restore Equilibrium ⇒ Inventories__⇒ Consumption = Production ⇒ Economy is back in Equilibrium
Under what conditions is price more likely to change than production to restore equilibrium in this situation?
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