Re: isi

Posted by lovekesh on May 11, 2012; 7:52am
URL: http://discussion-forum.276.s1.nabble.com/isi-tp7542957p7549560.html

Case I
when i add -600 into net inventory change and add nothing to C. In that case, what i just did that i added unsold goods in the previous year GDP and subtracted the same amount in next year GDP. Does it make sense?

Case II
i add -600 into inventory depreciation and 600 into the Counsumption. So, the net effect on year 2 gdp is zero. And it should be coz they were just all produced in last year. Now, should the GDP be -250. Why??
let's say x be the amount of shirts used for consumption and 250-x be used for investment.
Y= 600(d)+x(m) -600(for inventory) +(250-x)(m) -250
Y=0
Generally regarding inventory problems, let's say i bought some tyres for car manufacturing. Since i could not use em all, so it added to my inventory and added to country GDP.
In next year, i made cars and use those tyres i had at my disposal. so, in consumption spending which people spent on buying those cars, the amount of money they paid for that car also includes the cost of tyres. But the tyres were added in last year GDP. So, in order to avoid double counting, i subtract them from my inventory changes and thus avoid us the problem of double counting.
In our case, it's finished but unsold goods. so, in order to avoid double counting, i add them to consumption and subtract them from inventory changes. regarding imports, i add them to consumption and subtract them as imports which is equivalent to not mentioning them at all in our identity.
let's say shirts are for consumption
Y= 600+250(m) - 600 -250
Y=0
as it should be as the question said, there was no production in year 2.