7. What problem occurs when supply outpaces demand? \( \begin{array}{l}\text { a. Inflation } \\ \text { b. Surplus } \\ \text { c. Deficit } \\ \text { d. Monopoly }\end{array} \)

A surplus occurs when supply exceeds demand, leading to an excess of goods. This can result in businesses needing to lower prices to sell off excess inventory, potentially hurting profit margins and creating a cycle of reduced production if it continues. Historically, surpluses have impacted economies in various ways. For instance, during the Great Depression, overproduction in agriculture led to plummeting prices and widespread poverty among farmers. This scenario highlights the delicate balance between supply and demand, emphasizing the need for careful economic forecasting.