Inventory investment ______

A. reduces GDP because it is produced but not sold during the period.
B. reduces GDP because it belongs to intermediate goods.
C. should be counted in GDP because it represents goods that are produced (although not sold) during the period.

Correct Answer: C

GDP is designed to measure current production, not sales. Inventory investment consists of goods produced but not sold in the current time period. The production of these goods represents economic activity in the current period and must be counted in the current time period even if the units of output are sold in a later time period.