In one year, a firm increases its production by $9 million and increases sales by $8 million. All other things in the economy remaining the same, which of the following is true?
A)GDP increases by $8 million and inventory investment decreases by $1 million.
B)Inventory investment decreases by $1 million.
C)GDP increases by $9 million and inventory investment increases by $1 million.
D)GDP increases by $17 million.
E)GDP increases by $8 million and investment increases by $1 million.

Question

Quizplus · Accepted Answer

GDP increases by the total production, which is $9 million. The unsold production ($1 million) is added to inventory, thus increasing inventory investment by $1 million.

In One Year, a Firm Increases Its Production by $9