If business inventories at the beginning of the year equal $20 billion and at the end of the year equal $30 billion, then GDP will
Question
If business inventories at the beginning of the year equal 30 billion, then GDP will
Solution
The change in business inventories is a component of the Gross Domestic Product (GDP). GDP measures the total value of all goods and services produced within a country in a given period.
Here's how you calculate it:
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Determine the beginning and ending inventories. In this case, the beginning inventory is 30 billion.
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Subtract the beginning inventory from the ending inventory to find the change in inventory. In this case, 20 billion = $10 billion.
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If the inventory increases, it means that production has exceeded sales, which contributes positively to the GDP. If the inventory decreases, it means that sales have exceeded production, which contributes negatively to the GDP.
In this case, the inventory has increased by 10 billion.
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