An economy produces only 500,000 tables valued at $100 each. Of these, 100,000 are sold to consumers, 200,000 are sold to businesses, 100,000 are sold to the government, and 50,000 are sold abroad. No tables are imported. The unsold tables at the end of the year are held in inventory by the table manufacturers. What is the value of the investment component of GDP?

Question

Quizplus · Accepted Answer

The investment component of GDP is the value of the unsold inventory at the end of the year. The number of unsold tables is 50,000 and each table is valued at $100, so the investment component of GDP is 50,000 x $100 = $5 million. However, the question asks for the value of the investment component in millions of dollars, so the answer is $25 million.

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