An economy produces 500,000 tables valued at $100 each. Households purchase 100,000 tables, of which 50,000 are imported. Businesses purchase 200,000 domestically produced tables, the government purchases 100,000 domestically produced tables, and 50,000 domestically produced tables are sold abroad. At the end of the year, the table manufacturers hold the unsold tables in inventory. What is value of the investment component of GDP?

Question

Quizplus · Accepted Answer

Investment is the value of tables sold to business and the net change in inventory. In this case, 200,000 tables are sold to business and 100,000 tables are unsold and added to inventory, so 300,000 × $100 = $30 million goes into investment.

An Economy Produces 500,000 Tables Valued at $100 Each