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Investment Spending and GDP Change
easy

Which of the following actions is considered private investment and can lead to an increase in GDP?

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Learning Path
Learning Path

Question & Answer
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2
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4
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Choose the Best Answer

A

A household purchasing a new home

B

The government building a new highway

C

A corporation buying new machinery

D

A non-profit organization donating to a charity

Understanding the Answer

Let's break down why this is correct

Answer

Private investment refers to spending by individuals or businesses on goods that will be used to create future wealth. This can include buying new equipment, building factories, or investing in research and development. When companies invest in new projects or expand their operations, they often create jobs, which leads to more people earning money and spending it, thus boosting the economy. For example, if a tech company invests in a new manufacturing plant, it not only increases its production capacity but also creates jobs for workers in that area. This overall increase in economic activity contributes to a rise in the Gross Domestic Product (GDP).

Detailed Explanation

When a company buys new machines, it helps them make more products. Other options are incorrect because Buying a home is important, but it is not private investment that boosts production; This is a government action, not private investment.

Key Concepts

private investment
Topic

Investment Spending and GDP Change

Difficulty

easy level question

Cognitive Level

understand

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