GDP and Investment

Description: This quiz covers the concepts and relationships between Gross Domestic Product (GDP) and Investment.
Number of Questions: 15
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Tags: gdp investment economic growth
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Which of the following is NOT a component of GDP?

  1. Consumption

  2. Investment

  3. Government Spending

  4. Exports


Correct Option: D
Explanation:

Exports are not included in GDP as they represent goods and services produced domestically but sold to foreign countries.

Investment is defined as:

  1. The purchase of new capital goods

  2. The construction of new buildings

  3. The purchase of financial assets

  4. All of the above


Correct Option: D
Explanation:

Investment includes the purchase of new capital goods, the construction of new buildings, and the purchase of financial assets.

Which of the following is NOT a type of investment?

  1. Fixed Investment

  2. Inventory Investment

  3. Residential Investment

  4. Human Capital Investment


Correct Option: D
Explanation:

Human Capital Investment is not a type of investment as it does not involve the purchase of physical goods or assets.

Fixed Investment refers to:

  1. The purchase of new machinery and equipment

  2. The construction of new factories and offices

  3. The purchase of land

  4. All of the above


Correct Option: D
Explanation:

Fixed Investment includes the purchase of new machinery and equipment, the construction of new factories and offices, and the purchase of land.

Inventory Investment refers to:

  1. The change in the value of unsold goods

  2. The purchase of raw materials

  3. The purchase of finished goods

  4. All of the above


Correct Option: A
Explanation:

Inventory Investment refers to the change in the value of unsold goods held by businesses.

Residential Investment refers to:

  1. The construction of new houses and apartments

  2. The purchase of existing houses and apartments

  3. The renovation of existing houses and apartments

  4. All of the above


Correct Option: D
Explanation:

Residential Investment includes the construction of new houses and apartments, the purchase of existing houses and apartments, and the renovation of existing houses and apartments.

Investment is important for economic growth because it:

  1. Increases the productive capacity of the economy

  2. Creates jobs

  3. Raises the standard of living

  4. All of the above


Correct Option: D
Explanation:

Investment increases the productive capacity of the economy, creates jobs, and raises the standard of living.

Which of the following is NOT a factor that affects investment?

  1. Interest rates

  2. Inflation

  3. Government policies

  4. Consumer confidence


Correct Option: D
Explanation:

Consumer confidence is not a factor that directly affects investment.

How does an increase in interest rates affect investment?

  1. It increases investment

  2. It decreases investment

  3. It has no effect on investment

  4. It depends on the specific circumstances


Correct Option: B
Explanation:

An increase in interest rates generally decreases investment as it makes borrowing more expensive.

How does an increase in inflation affect investment?

  1. It increases investment

  2. It decreases investment

  3. It has no effect on investment

  4. It depends on the specific circumstances


Correct Option: D
Explanation:

The effect of inflation on investment depends on various factors such as the type of investment, the level of inflation, and the expectations of investors.

Government policies can affect investment by:

  1. Providing subsidies and tax incentives

  2. Implementing regulations and restrictions

  3. Changing the tax code

  4. All of the above


Correct Option: D
Explanation:

Government policies can affect investment by providing subsidies and tax incentives, implementing regulations and restrictions, and changing the tax code.

Which of the following is NOT a type of government policy that can stimulate investment?

  1. Providing subsidies and tax incentives

  2. Reducing interest rates

  3. Increasing government spending

  4. Deregulation


Correct Option: C
Explanation:

Increasing government spending is not a type of government policy that can stimulate investment as it may lead to higher taxes and crowding out of private investment.

Deregulation refers to:

  1. Reducing government regulations and restrictions

  2. Increasing government regulations and restrictions

  3. Changing the tax code

  4. None of the above


Correct Option: A
Explanation:

Deregulation refers to reducing government regulations and restrictions.

How does deregulation affect investment?

  1. It increases investment

  2. It decreases investment

  3. It has no effect on investment

  4. It depends on the specific circumstances


Correct Option: A
Explanation:

Deregulation generally increases investment as it reduces the costs and barriers to entry for businesses.

Which of the following is NOT a type of investment that can contribute to economic growth?

  1. Investment in new technologies

  2. Investment in education and training

  3. Investment in infrastructure

  4. Investment in financial assets


Correct Option: D
Explanation:

Investment in financial assets does not directly contribute to economic growth as it does not increase the productive capacity of the economy.

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