A car manufacturing firm pays a supplier to install new machinery in a factory. Which of the following statements is true?

Question

BlackTom AI · Accepted Answer

Investment in GDP includes business spending on capital goods and the services required to make them operational, so this payment is treated as investment.

1. Relevant knowledge points and concepts
- Expenditure approach to GDP: GDP = C + I + G + (X − M).
- I (investment) comprises gross fixed capital formation (business purchases of machinery, equipment, buildings), changes in inventories, and sometimes residential investment.
- Payments by firms to acquire and install new machinery are part of gross fixed capital formation (capital investment).
- Consumption (C) is spending by households, not firms. Inventories are goods held for sale or use in production, not fixed capital.

2. Step-by-step reasoning
- A car manufacturer pays a supplier to install new machinery: the firm is acquiring a capital asset (machinery) and the installation service makes it ready for productive use.
- National accounts record acquisition plus necessary installation/transport/installation services as part of gross fixed capital formation.
- Therefore the expenditure increases the investment component I in GDP.

3. Intermediate steps / account treatment
- Purchase price of the machinery + installation service = gross fixed capital formation.
- In GDP identity: I increases by that amount, so GDP rises by the same amount (assuming the supplier is domestic).
- If the supplier were foreign, the purchase would still be recorded in investment but imports (M) would rise by the same amount, offsetting the effect on GDP; the question implies a domestic supplier, so the straightforward treatment is as domestic investment.

4. Why the correct answer is correct
- Option (a) correctly classifies the payment as an investment (business fixed capital formation), which is included in GDP via I.

5. Why other options are incorrect
- (b) Incorrect: It is included in GDP, not excluded.
- (c) Incorrect: Consumption expenditure refers to household spending, not firms buying capital goods.
- (d) Incorrect: Inventories are goods held for sale or input; machinery is a fixed capital asset, not part of inventories.

6. Conclusion
This expenditure is included in the investment component of GDP; option (a) is correct.

A car manufacturing firm pays a supplier to install new machinery in a factory. Which of the following statements is true?单项选择题

类似问题

The components of the expenditure method to measure GDP include all of the following EXCEPT:

A car manufacturing firm pays a supplier to install new machinery in a factory. Which of the following statements is true?

Which of the following would be included as part of the Consumption component of GDP?

GDP includes the value of final goods, and not intermediate goods, because:

Refer to table 6.1. How much (in billions of $) did the government spend in 2020?

True or false: Transfer payments are included in GDP

True or false: Intermediate goods are included in GDP

True or false: Sales of second-hand goods are included in GDP

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单