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

question 103

Multiple Choice

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.

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Definitions:

Cash Cycle

The period between the outlay of cash for the purchase of inventory and the receipt of cash from accounts receivable, representing the time it takes for a company to turn its investments in inventory back into cash.

Receivables Factoring

The process of selling a business's accounts receivable to a third party at a discount to quickly generate cash.

Bad Debts

Financial amounts owed to a company that are unlikely to be paid by debtors, often recognized as an expense on the company's income statement.

Discounted Amount

The present value of a future sum of money or stream of cash flows given a specific rate, reflecting the time value of money.