Gross Domestic Product Quick Check

3 of 53 of 5 Items
Question
Which of the following would be considered investment in the calculation of GDP?(1 point)
Responses

A manufacturing firm builds a new plant in Mexico.
A manufacturing firm builds a new plant in Mexico.

An individual purchases stock in a company.
An individual purchases stock in a company.

A child places money under his mattress for safe keeping.
A child places money under his mattress for safe keeping.

A school district deposits excess funds into a savings account.

1 answer

In the calculation of Gross Domestic Product (GDP), investment refers to the purchase of goods that will be used for future production. This typically includes business expenditures on physical capital, like factories or machinery.

Among the options provided:

  • A manufacturing firm builds a new plant in Mexico. (This is considered investment, but it contributes to Mexico's GDP, not the GDP of the firm’s home country.)

  • An individual purchases stock in a company. (This is a financial transaction and does not count as investment in GDP terms.)

  • A child places money under his mattress for safekeeping. (This is not counted as investment; it is simply saving.)

  • A school district deposits excess funds into a savings account. (This is also not counted as investment; it's a form of saving.)

The correct response in the context of the U.S. GDP calculation would be the first option if considering broader investment. However, if strictly adhering to the domestic investment perspective, none of the provided options would count towards the GDP of the United States. If your query specifically sought a typical answer from a domestic viewpoint, please clarify.

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