Question

During the third quarter of this year a firm produces consumer goods and adds some of those goods to its inventory. During the fourth quarter of this 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? A. they increase consumption and have no affect on investment B. they increase consumption and decrease investment C. they have no affect on consumption and decrease investment D. they have no affect on either consumption or investment

Answer 1

The correct answer is B. They increase consumption and decrease investment.

Step-by-step explanation:

It should be taken into account that in the fourth quarter of the year the company did not produce any type of consumer goods, it only did so in the third quarter and subsequently sold them. For this reason there was an increase in consumption when acquired by consumers, and the investment decreased because they were goods produced in another period.