During the Third Quarter of This Year a Firm Produces

question 85

Multiple Choice

During the third quarter of this year a firm produces consumer goods and adds some of those goods to its inventory.During the fourth quarter of this 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)they increase consumption and have no affect on investment
• B)they increase consumption and decrease investment
• C)they have no affect on either consumption or investment
• D)they have no affect on consumption and decrease investment

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Definitions:

Cash Flow

The aggregate of funds entering and exiting a corporation, significantly impacting its liquidity levels.

Merger

The combining of two or more companies into a single entity, often to enhance competitiveness and efficiency.

Incremental Cash Flows

The difference between a firm’s future cash flows with a project and without the project.

Outstanding Shares

The total number of shares of stock that are currently owned by shareholders, including those held by institutional investors and restricted shares.