Suppose that GDP was $200 billion in year 1 and that all other components of expenditures remained the same in year 2 except that business inventories increased by $10 billion. GDP in year
2 is
A) $180 billion.
B) $190 billion.
C) $200 billion.
D) $210 billion.

Question

Quizplus · Accepted Answer

GDP in year 2 would be equal to the sum of all components of expenditures, including the increase in business inventories. Therefore, GDP in year 2 would be $200 billion (same as year 1) + $10 billion (increase in business inventories) = $210 billion.

Suppose That GDP Was $200 Billion in Year 1 and That