Question

A manufacturer produces 1 million televisions in the first quarter of the year. It sells 900,000 of them before the end of the first quarter, and holds the others in its warehouse. How will the 100,000 unsold televisions be treated in the GDP statistics? a. Since the televisions eventually will be bought by consumers, they will be included as consumption in the first quarter. b. Since the televisions were not purchased in the first quarter, they will be counted as an increase in second-quarter GDP. c. The televisions will be counted as a change in inventory in the first quarter and so will be included in first-quarter GDP. d. The televisions will be counted as a change in inventory in the first quarter, and when sold in the second quarter will raise second-quarter GDP.

Answer 1

The correct answer is option c.

Step-by-step explanation:

A manufacturer produces 1 million televisions in the first quarter of the year.

It sells 900,000 of them before the end of the first quarter and holds 100,000 in its warehouse.

These 100,000 units of televisions will represent a change in inventory in the first quarter. A change in the inventory of a firm is considered an investment. And an investment is included in GDP. So this 100,000 units of unsold television will be included in the GDP of the first quarter.