During the Third Quarter of 2006,a Firm Produces Consumer Goods

question 23

Multiple Choice

During the third quarter of 2006,a firm produces consumer goods and adds some of those goods to its inventory.During the fourth quarter of that year,the firm sells the goods at a retail outlet,with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter.These actions affect which component(s) of fourth-quarter GDP?

• A)These actions affect only consumption, and they affect consumption positively.
• B)These actions affect only investment, and they affect investment positively.
• C)These actions affect consumption positively and investment negatively.
• D)These actions affect both consumption and investment positively.

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Definitions:

Contractual Obligation

A contractual obligation is a duty or responsibility that one party is legally bound to perform under a contract agreement with another party.

Cash Consideration

Payment made in cash during a transaction, as opposed to stock exchange or other non-cash assets.

Amortised Cost

A financial valuation technique that gradually writes off the initial cost of an asset over a period, or the method of allocating the cost of an intangible asset over its useful life.

Effective Interest Rate

The rate that discounts the estimated future cash payments or receipts through the expected life of the financial liability or asset or, when appropriate, a shorter period to the net carrying amount of the financial asset.