📚 Learning Guide
Investment Spending and GDP Change
easy

What effect does an increase in investment spending have on a country's GDP?

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Learning Path

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Choose the Best Answer

A

It decreases GDP

B

It has no effect on GDP

C

It increases GDP

D

It only affects the unemployment rate

Understanding the Answer

Let's break down why this is correct

Answer

When a country increases its investment spending, it usually leads to a rise in its Gross Domestic Product (GDP). Investment spending means that businesses are buying new equipment or building new facilities, which creates jobs and helps the economy grow. For example, if a car company decides to build a new factory, it will need workers to construct it, and later, to produce cars. This increase in jobs means more people have income to spend, which can boost other areas of the economy as well. Overall, more investment spending helps to create a cycle of growth that can raise the country's GDP.

Detailed Explanation

When businesses spend more money to buy things like machines or buildings, it helps the economy grow. Other options are incorrect because Some might think that spending less can help the economy; It's a common mistake to think that spending has no impact.

Key Concepts

investment spending
Topic

Investment Spending and GDP Change

Difficulty

easy level question

Cognitive Level

understand

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