A company produces 100 cars in the year 2017 but only manages to sell 90 of...
A company produces 100 cars in the year 2017 but only manages to sell 90 of the cars. In the year 2018 they sell the 10 cars that were not sold in the previous year to consumers. In which spending categories of GDP do we record the 10 cars?
A) The unsold cars count in the inventory investment category for both years and count as consumption spending in 2018.
B) The unsold cars count as inventory investment for 2017. 2018 GDP is not affected.
C) The unsold cars count as inventory investment in 2017 and consumption spending in 2018.
D) The unsold cars count as consumption spending in 2018.
Homework Answers
Ans: The unsold cars count as inventory investment for 2017. 2018 GDP is not affected.
Explanation:
GDP is defined as the value of goods and services produced in a year. So, when a company produces 100 cars in the year 2017 but only manages to sell 90 of the cars, the rest 10 unsold cars are to be treated as a part of inventory investment for 2017. And, 2018 GDP is not affected.
Thus, option [B] is correct answer.
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