Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories fell by $10 billion. GDP in year 2 is
A) $180 billion.
B) $190 billion.
C) $200 billion.
D) $210 billion.

Question

Quizplus · Accepted Answer

If all other components of expenditures remained the same, then the only change in GDP would be the change in business inventories. Since they fell by $10 billion, GDP in year 2 would be $190 billion ($200 billion - $10 billion). Therefore, the correct answer is B.

Suppose That GDP Was $200 Billion in Year 1 and That