Inventory changes (that is,goods produced but not sold)are important in calculating GDP because

Question

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Inventory changes are included in GDP calculations because we want to measure all current production, whether sold or not. This is in line with the concept of GDP, which measures the value of all goods and services produced within the borders of a country during a specific period of time. Therefore, option E is the best choice. Option A is incorrect because inventory changes can be highly volatile; option B is partially correct, but it does not explain why inventory changes are important for GDP calculations; option C is incorrect as transfer payments are not related to inventory changes; and option D is not relevant to the question.

Inventory Changes (That Is,goods Produced but Not Sold)are Important in Calculating