A Firm Produces Consumer Goods and Adds Some to Inventory

Multiple Choice

A firm produces consumer goods and adds some to inventory in the third quarter. In the fourth quarter, the firm sells the goods at a retail outlet. As a result of these actions, what happens to the consumption and investment components of GDP in the fourth quarter?

A) investment decreases, consumption does not change
B) investment increases, consumption decreases
C) investment decreases, consumption increases
D) investment does not change, consumption increases