Multiple Choice

In a simplified economy consisting only of households and firms, a firm produces $100,000 worth of consumer goods in a year. In that same year, the firm sells $90,000 worth of these goods to households. The remaining $10,000 worth of goods are not sold and are added to the firm's inventory. Why does the total expenditure in this economy still equal the total output of $100,000?

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Updated 2025-10-07

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