In calculating GDP, national income accountants:
A)treat inventory changes as an adjustment to personal consumption expenditures.
B)ignore inventories because they do not represent final goods.
C)subtract increases in inventories and add decreases in inventories.
D)add increases in inventories and subtract decreases in inventories.

Question

Quizplus · Accepted Answer

In calculating GDP, national income accountants add increases in inventories and subtract decreases in inventories. This is because inventories represent goods that have been produced but not yet sold, and therefore still add value to the economy. When inventory levels change, it reflects a change in the amount of goods produced, and so should be included in the calculation of GDP.

In Calculating GDP, National Income Accountants