Final answer:
The purchase of a new machine by a business from a U.S. manufacturer is classified as an Investment. As part of GDP components, such a purchase increases the capital stock and productive capacity of the domestic economy. This is different from Consumption, which includes foreign products and does not add to domestic production.
Step-by-step explanation:
The purchase of a new machine by a business that is manufactured by a U.S. corporation is classified as Investment in the context of economic activity. This classification is part of the components of Gross Domestic Product (GDP), which also includes Consumption, Government Spending, and Net Exports. It is important to note that when an American buys a foreign product, it is counted as Consumption, and any income generated does not go to American producers but to those in another country; such imports are subtracted out in the 'M' term of the Net Exports equation. However, in the case where the machinery is produced by a U.S. corporation, and the purchase is for business use, it represents investment in the domestic economy, contributing to the production capacity and capital stock of the United States.
In summary, when a business purchases machinery for productive use, especially from a domestic producer, it is an investment, as it is expected to contribute to future production and revenue.