The correct option is 1 and 3 only.
Explanation
In macroeconomics, economic variables are classified into stock and flow variables. A stock variable is measured at a specific point in time, whereas a flow variable is measured over a specific period of time. Inventory refers to the stock of unsold finished goods, semi-finished goods, or raw materials held by a firm.
Statement-wise Analysis:
- Statement 1 is Correct: Inventory is defined as the stock of unsold finished goods, semi-finished goods, or raw materials that a firm carries from one year to the next. Since it is measured at a specific point in time, it is a stock variable.
- Statement 2 is Incorrect: The change in inventory is calculated as the difference between inventory at the end of the year and inventory at the beginning of the year. Since this change is measured over a period of time (a year), it is a flow variable. In National Income accounting, this change is treated as part of capital formation (investment).
- Statement 3 is Correct: Firms plan production based on expected sales. If there is an unexpected fall in sales, the firm will be left with more unsold goods than anticipated. This leads to an unplanned accumulation of inventories.
Key Takeaway:
Inventory (level) is a stock concept, while Change in Inventory is a flow concept. Unplanned inventory accumulation occurs when actual sales fall short of expected sales.