During the third quarter of 2006,a firm produces consumer goods and adds some of those goods to its inventory.During the fourth quarter of that year,the firm sells the goods at a retail outlet,with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter.These actions affect which component(s)of fourth-quarter GDP?

Question

Quizplus · Accepted Answer

When the firm sells goods from its inventory, consumption increases because consumers are purchasing these goods. However, the inventory reduction means that investment, specifically inventory investment, decreases.

During the Third Quarter of 2006,a Firm Produces Consumer Goods