Unformatted text preview: in their own “backyards.” This can make it very difficult to cut spending because we all have “backyards” that we expect our elected representatives to defend. As disposable income decreases, we would expect consumption to decrease as well. As consumption becomes less than production in the short run, inventories begin to swell. Managers notice the increase in inventories, and realize they need to make adjustments to bring the system back into equilibrium. If the economy is currently experiencing low unemployment and factories are operating near capacity, managers may choose to decrease production by cutting work hours, or laying employees off. On the other hand, if unemployment was rather high and factories were operating at less than full capacity; then managers may choose to decrease 46 were operating at less than full capacity; then managers may choose to decrease prices....
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- Fall '10
- Economics, Fayetteville, Fayetteville, North Carolina, Cumberland County