If a firm produces a good and then adds it to its inventory rather than selling it, for the purposes of GDP accounting the firm is considered to have "purchased" the good so it will count as part of that period's investment expenditures.

Question

Quizplus · Accepted Answer

In GDP accounting, when a firm produces goods and adds them to inventory instead of selling them, these goods are considered as investment in inventories. This is because they represent future sales and are part of the firm's assets, thus contributing to the investment component of GDP.

If a Firm Produces a Good and Then Adds It