Question

State whether the following statement is true or false . Give valid reasons . An economy facing unintended accum,ulation of inventories would try to reduce aggregate demand​

Answer 1

Answer:

True

Explanation:

As planned savings are more causing the Marginal Propensity to Consume to reduce thus Aggregate Demand will fall and producers will have accumulation of inventory.

Answer 2

As projected savings increase, the Marginal Propensity to Consume decreases, lowering aggregate demand and pushing companies to stockpile inventories.

Unintended inventories occur when the economy's aggregate demand is smaller than the economy's aggregate supply. The producer's stock will be piled up as a result of this. As a result, in order to address the issue, the economy must enhance aggregate demand.

Thus, the statement  An economy facing unintended accumulation of inventories would try to reduce aggregate demand​ is true.