Multiplier: Replenishment of Business Inventories
Using the Multiplier could you please explain how the replenishment of business inventories will affect the GDP so sharply?
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GDP generally is defined as the market value of the goods and services produced by a country. One way to calculate a nation's GDP is to sum all expenditures in the country. This method is known as the expenditure approach and is described below.
Expenditure Approach to Calculating GDP
The expenditure approach calculates GDP by summing the four possible types of expenditures as follows:
GDP = Consumption
+ Investment
+ Government Purchases
+ ...
Solution Summary
This solution explains the concept of multiplier.
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