In the national income and product accounts, a reduction of inventories counts as

Question

Quizplus · Accepted Answer

A reduction of inventories is considered as negative investment in the national income and product accounts. It means that businesses are selling more goods from their existing inventories than they are producing. This one-time reduction is subtracted from the Gross Domestic Product (GDP) calculation because the goods sold were produced in a previous period and they were included in the GDP at that time. Therefore, the reduction of inventories is considered as a negative investment in the context of national accounts.

In the National Income and Product Accounts, a Reduction of Inventories