If Toy Stores Overestimate the Demand for a Toy in 2004

question 131

Multiple Choice

If toy stores overestimate the demand for a toy in 2004 and,as a result,have an unexpectedly large number of them on hand at the end of the year,the value of the increased inventory of those toys will be counted as

• A)investment in 2004
• B)investment in 2005
• C)consumption in 2004
• D)consumption in 2005
• E)part of GDP only when the toys are sold

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Definitions:

Warranty Expenses

Costs incurred by a company for repairing, replacing, or servicing products under warranty, recognized as a liability at the time of sale.

Municipal Obligations

Debt securities issued by municipalities to fund public projects, which may offer tax-exempt interest income to investors.

Operating Loss Carryback

A tax provision that allows a company to apply a current year's net operating losses to past profit years to obtain a tax refund.

Operating Loss Carryforward

Future reductions in taxable income allowed due to losses incurred in previous periods.