8. In one year, a company increases its production by $20 million and increases sales by...

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8. In one year, a company increases its production by $20 million and increases sales by...

8. In one year, a company increases its production by $20 million and increases sales by $18 million. Ceteris Paribus, which of the following is true?

A) GDP increases by $ 18 million and inventory investment decreases by $2 million

B) GDP increases by $20 million and inventory investment increases by $2 million

C) GDP increases by $18 million and inventory investment equals $0

D) GDP increases by $18 million and inventory investment increases by $2 million

business economics

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Answer 1

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Option B

B) GDP increases by $20 million and inventory investment increase by $2 million

The GDP is a sum of economic final goods and services produced within a year within a country.

The production increased by $20 million so it is added to the GDP and $2 million is added to investment increase.

The GDP is production of the year so it adds production and the production not sold is an investment spending so added to the investment.

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Answer 2

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