Define business inventories and explain how they are counted in GDP.

Business

1 answer:

Liono4ka [1.6K]3 years ago

8 0

Answer:

Business Inventories refer to the excess of goods produced over goods sold. In a given year, final goods and services are produced for sale so they are consumed. However, not all of these goods are consumed with the rest being consumed in another period. These goods that were not sold for consumption will then fall under Business Inventories.

When accounting for them in GDP, only the increase in Inventory is added. This way the inventory is accounted for in the year that it was produced in. Specifically speaking, Inventories fall under the <em>Investment</em> component of GDP and is typically referred to as <em>Inventory Investment</em>.

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