What usually happens to inventories at the beginning of a recession?

Question

Question on my Macroeconomics HW. I always give best answer!

Answer 1

The answer is obviously that they will go unsold as demand declines.  In the age of just in time production though there isn't really that much impact.  Most major stores don't stock large warehouses like they had to in the old days.  Computers relay current sales info to their factories who ship new ones off the line the same day or don't.

Answer 2

Most often it gets liquidated. There is almost always very strong movement one way or the other. There are many great sites to read about examples. Here are a few:

Answer 3

Inventories always continue to increase because no one knew the beginnings of any recessions so they keep on piling up inventories.

When they start seeing a recesssion, that is the time they stop their behaviour and op production so as to decrease inventory. By that time it is too late and they could suffer great loss of profits.