This Question: 1 pt 1 of 5 (0 complete) Which of the following accurately descri

Question

This Question: 1 pt 1 of 5 (0 complete) Which of the following accurately describes the relationship between an economy's production of goods and services, its sales of goods and services, and its inventory investment? OA. SalesProduction Inventory investment O B. Inventory investmentProduction - Sales O C. Production SalesInventory investment O D. All of the above O E. B and C only In any given year, inventory investment O A. is typically small and may be positive, negative, or zero. O B. is usually small and carries the opposite sign of its value in the previous year O C. tends to be quite large and is generally positive. D. none of the above. Click to select your answer.

Explanation / Answer

A)

The difference between goods produced (production) and goods sold (sales) in a given year is called inventory investment.

i.e. Inventory investment = Production - Sales

B)

if production per unit time exceeds sales per unit time, then inventory investment per unit time is positive; as a result, at the end of that period of time, the stock of inventories on hand will be greater than it was at the beginning. The reverse is true if production is less than sales.

Therefore option (a) is correct that it can be positive, negative or zero.

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