Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increased investment spending leads to a decrease in GDP.
B
Increased investment spending has no effect on GDP.
C
Increased investment spending leads to an increase in GDP.
D
Increased investment spending only affects GDP in the long run.
Understanding the Answer
Let's break down why this is correct
Answer
Investment spending refers to the money that businesses and governments spend on things like new buildings, equipment, and technology. This spending is important because it contributes to the overall economic activity in a country, which is measured by Gross Domestic Product (GDP). When investment spending increases, it often leads to more jobs and higher production, resulting in a rise in GDP. For example, if a company builds a new factory, it not only spends money on construction but also hires workers, which boosts income and spending in the community. Therefore, a rise in investment spending usually causes GDP to grow, while a decrease can lead to slower economic growth.
Detailed Explanation
When businesses invest more money, they buy new equipment and hire more workers. Other options are incorrect because Some might think that spending less can help the economy; It’s a common idea that spending doesn’t change anything.
Key Concepts
GDP (Gross Domestic Product)
Topic
Investment Spending and GDP Change
Difficulty
easy level question
Cognitive Level
understand
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