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Macmillan Learning

What does the investment component of GDP measure?

A. spending on domestically produced goods by foreign buyers
B. spending on goods to be used in future production
C. spending by government agencies on goods and services
D. spending by households on goods and services

A good produced in the current time period but put into a firm's inventory instead of being sold

A. is only included as a part of consumption in future GDP when it is sold.
B. is counted as consumption in current GDP since it was produced in the current time period.
C. is excluded from current GDP.
D. is considered unsold inventory and counted as a part of investment in current GDP.



Answer :

GinnyAnswer

Final answer:

The investment component of GDP measures spending on goods for future production, new houses, excludes financial products, and indicates future economic growth potential.


Explanation:

The investment component of GDP measures:



  2. Spending on goods to be used in future production, including business investment in equipment, construction of new facilities, or purchase of machinery.

  4. Spending by households on new houses, as it contributes to the capital stock and future productivity.

  6. Excludes purchases of financial products as those are classified as savings rather than investment to avoid double counting.


This component reflects how much a country is adding to its capital stock, hinting at future GDP growth potential.


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