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:

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as the beginning inventory plus purchases minus cost of goods sold.

Fixed Cost Per Unit

The total fixed costs divided by the number of units produced, representing the cost allocated to each unit.

Absorption Costing

A bookkeeping approach that incorporates all costs associated with production, including direct materials, direct labor, and both variable and fixed overhead expenses, into a product's cost.

Selling and Administrative Expenses

Operating expenses related to selling products or services and managing the business, excluding production costs.