Suppose that inventories were $40 billion in year 1 and $50 billion in year 2. For year 2, national income accountants would
A) add $10 billion to other elements of investment in calculating total investment.
B) subtract $10 billion from other elements of investment in calculating total investment.
C) add $45 billion (= $90/2) to other elements of investment in calculating total investment.
D) subtract $45 billion (= $90/2) from other elements of investment in calculating total investment.

Question

Quizplus · Accepted Answer

The increase in inventories from $40 billion to $50 billion indicates that there was an additional $10 billion of investment in inventories. This $10 billion would be added to other elements of investment (such as construction of new factories or purchases of machinery) in calculating total investment.

Suppose That Inventories Were $40 Billion in Year 1 and $50