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National Income Accounting — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsNational Income Accounting2 Marks
Question
What is the difference between planned and unplanned inventory accumulation? Write down the relation between change in inventories and value added of a firm.
✓

Answer

Planned Inventory, it refers to changes in the stock inventories that have occurred in a planned way. In a situation of planned inventory accumulation, firm will plan to raise its inventories.

Unplanned Inventory, it refers to changes in the stock of inventories that have occurred in an unexpected way. In a situation of unplanned inventory accumulation, due to unexpected fall in sales, the firm will have unsold stock of goods.

Value added of a firm (GVA) = Gross value of output produced by the firm – Value of intermediate goods used by the firm.

OR

GVA = Value of sales by the firm + Value of change in inventories – Value of intermediate goods used by the firm.

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