A firm decides to increase production, but households are not increasing their demand for goods and services. Based on the circular flow model, what could happen next?

Question

Answer

The firm may accumulate excess inventory and reduce production in the future.

Answer

The firm will continue producing at the same rate indefinitely.

Answer

The government will force households to buy more goods.

Answer

Households will automatically increase their spending to match production.

Crowdly

A firm decides to increase production, but households are not increasing their d...

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