A firm produces consumer goods and adds some to inventory in the third quarter. In the fourth quarter the firm sells the goods at a retail outlet, leaving the firm's inventory diminished. As a result of these actions, what component(s) of GDP change in the fourth quarter?

Question

Quizplus · Accepted Answer

In the fourth quarter, consumption increases because the goods are sold to consumers. Investment decreases because the goods are removed from inventory, which is considered disinvestment.

A Firm Produces Consumer Goods and Adds Some to Inventory