An economy produces only 1,000,000 computers valued at $2,000 each. Of these, 200,000 are sold to consumers, 300,000 are sold to businesses, 300,000 are sold to the government, and 100,000 are sold abroad. No computers are imported. At the end of the year, the computer manufacturers hold the unsold computers in inventory. What is the value of the investment component of GDP?

Question

Quizplus · Accepted Answer

Investment is the value of computers sold to business and the net change in inventory. In this case, 300,000 computers are sold to business and 100,000 computers are unsold and added to inventory, so 400,000 × $2,000 = $0.8 billion goes into investment.

An Economy Produces Only 1,000,000 Computers Valued at $2,000 Each