[Solved] When aggregate supply exceeds aggregate demand -

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Q.	When aggregate supply exceeds aggregate demand -
A.	unemployment falls
B.	prices rise
C.	inventories accumulate
D.	unemployment develops
Answer» C. inventories accumulate
Explanation: Deflation sets in when aggregate supply exceeds aggregate demand. Recession sets in. This will lead to a buildup in stocks (inventories) and this sends a signal to producers either to cut prices (to stimulate an increase in demand) or to reduce output so as to reduce the buildup of excess stocks. Either way -there is a tendency for output to move closer to the current level of demand.

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