How do investments in capital goods raise a country's gross domestic product?

Question

A.
by reducing unemployment

B.
by reducing natural resource usage

C.
by improving the skills of the labor force

D.
by improving industrial efficiency

Answer 1

Investments in capital goods primarily contribute to a country's gross domestic product (GDP) D. by improving industrial efficiency.

When a country invests in capital goods such as machinery, equipment, and technology, it enhances its production capabilities, leading to more efficient output processes. This increase in efficiency typically results in higher production levels, which can boost GDP.

While options A (reducing unemployment), B (reducing natural resource usage), and C (improving the skills of the labor force) can also have positive effects on the economy, the direct relationship of capital goods investment to GDP growth is most clearly linked to enhanced industrial efficiency.