Unintended Changes in Inventories

question 26

Multiple Choice

Unintended changes in inventories

• A) cause the economy to move away from the equilibrium GDP.
• B) are treated as components of consumption.
• C) bring actual investment and saving into equality only at the equilibrium level of GDP.
• D) bring actual investment and saving into equality at all levels of GDP.

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Definitions:

Beginning Inventory

The value of all inventory held by a business at the start of an accounting period.

Periodic Inventory System

An inventory accounting system where the inventory is physically counted at specific intervals to determine the cost of goods sold and ending inventory value.

Average Cost

An inventory costing method where all costs of inventory purchased are averaged to determine the cost of goods sold and ending inventory value.

Unit Cost

The cost incurred to produce, acquire, or deliver one unit of a product or service.