An Example of "Investment" in Computing Real GDP Using the Expenditure

question 188

Multiple Choice

An example of "investment" in computing real GDP using the expenditure approach is the purchase of

• A) computer chips by Dell to put in their personal computers.
• B) a new set of tools by an auto mechanic, for use in repairing cars.
• C) a 100 year old house by a married couple.
• D) 100 shares of IBM stock.

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Definitions:

Variable Costs

Costs that vary depending on how much is produced or sold.

Break-Even Point

The production level or sales volume at which total revenues equal total expenses, resulting in no net loss or gain.

Contribution Margin

The amount remaining from sales revenue after variable costs are deducted, contributing to covering fixed costs and generating profit.

Break-Even Point

The financial point at which costs equal revenues, so there is no net loss or gain.