Question

The Arcadia Entertainment Co. produced 20,000 DVDs of the movie Thor in 2011. Only 4,000 copies remained unsold at the end of 2011. As a result:

A) only 16,000 DVDs should be included in GDP in 2011 as consumption expenditure.
B) all 20,000 DVDs will be included in GDP in 2011, 16,000 as consumption expenditure and 4,000 as investment expenditure.
C) only 16,000 DVDs are included in GDP of 2011; the remaining 4,000 are counted in GDP of 2012.
D) all 20,000 DVDs are initially counted in 2011 GDP as consumption expenditure, but they will be subtracted and added to 2012 GDP as the merchandise gets sold.

Answer 1

The correct answer is option B.

Step-by-step explanation:

The Arcadia Entertainment Co. produced 20,000 DVDs of the movie Thor in 2011.

Only 4,000 copies remained unsold at the end of 2011. The rest 16,000 were sold.

The sold copies of the DVD will be included in the GDP as consumption expenditure. The rest of the DVDs that were not sold will be added to the inventory. This will be included in The GDP as investment expenditure.