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:

Cash Flow Statement

A financial report that tracks the amount of cash and cash equivalents entering and leaving a company.

Amortization

The process of gradually writing off the initial cost of an asset over a period, often used for intangible assets like patents and copyrights.

Bond Discount

The difference between the face value of a bond and the price for which it sells when the selling price is lower than its face value.

Indirect Method

A cash flow statement technique that starts with net income and adjusts for changes in balance sheet accounts to arrive at operating cash flow.