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Evaluate whether all of the following are considered to be investment (I) in calculating GDP.

a. The purchase of a new automobile for private, non-business use
b. The purchase of a new house
c. The purchase of corporate bonds

User AppsWise
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1 Answer

15 votes
15 votes

Answer:

only the purchase of a new house would be considered investment spending of the three options

Step-by-step explanation:

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export

Consumption spending includes spending by households on goods and services. Consumption spending includes :

spending on durables - e.g. laptop

spending on nondurables - e.g. clothes, food

spending on services - e.g. payment of hospital bill

the purchase of a textbook by a student is an example of consumption spending on durable goods

Investment - It includes purchases of goods and services made by businesses in the production of goods and services

Government spending - It includes government consumption expenditure and gross investment. The purchase of a new limousine for the president is an example of consumption expenditure

The purchase of a new automobile for private, non-business use is an example of consumption spending on durables

The purchase of a new house is an example of investment spending

The purchase of corporate bonds is not included in the calculation of GDP

User Cmujica
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