Assertion (A): When aggregate demand is less than output, firms cut production.
Reason (R): When aggregate demand is less than output, firms' inventories fall below what they planned.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

A is true: unsold goods pile up, so firms produce less.
R is false: inventories rise above what was planned, not fall.

Concept: When AD falls short
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsEquilibrium: AD equals output

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Assertion (A): When aggregate demand is less than output, firms cut production.Reason (R): When aggregate demand is less than output, firms' inventories fall below what they planned.

Explanation

Assertion (A): When aggregate demand is less than output, firms cut production.
Reason (R): When aggregate demand is less than output, firms' inventories fall below what they planned.