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Country A specializes in the production of automobiles, and 45 percent of its population works in ...

Country A specializes in the production of automobiles, and 45 percent of its population works in the automobile manufacturing industry. A sharp increase in the world prices of automobiles led to a boom in the automobile manufacturing industry in Country A. However, the automobile manufacturers overestimated the demand for automobiles. This led to overproduction, which resulted in a large stock of unsold cars. Which of the following is likely to happen in the near future?

▸ Household consumption in Country A will increase.

▸ The unemployment rate in Country A will increase.

▸ The supply of credit in Country A will increase.

▸ Investment in Country A will increase.

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

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This helped my grade so much Perfect

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