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Question:

Data for a manufacturing industry indicate that inventories of work in progress are increasing faster than sales. This is most likely to indicate that:

A firms expect demand to increase.
Explaination

An increase in work-in-progress inventory relative to sales is likely to result from firms increasing production because they expect an increase in demand. An increase in finished goods inventories relative to sales would be more likely to indicate a decrease in demand that may be caused by obsolete inventory or a business cycle peak.