In an Economy,the Value of Inventories Rose from $100 Billion

question 18

Multiple Choice

In an economy,the value of inventories rose from $100 billion in 2012 to $150 billion in 2013.In calculating total investment for 2013,national income accountants would:

• A) decrease it by $50 billion.
• B) increase it by $50 billion.
• C) decrease it by $100 billion.
• D) increase it by $150 billion.

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Definitions:

Normal Good

A type of good for which demand increases as the income of individuals rises, holding all other factors constant.

Giffen Good

A product for which demand increases as its price increases, contrary to the standard demand model, due to the interplay of income and substitution effects.

Income Effect

The change in an individual's or economy's income and how that change affects the quantity demanded of a good or service.

Price Decrease

A reduction in the cost of a good or service, which can increase consumer demand but may decrease supplier profits.