When Calculating GDP Using the Expenditure Approach, the Investment Component

question 3

Multiple Choice

When calculating GDP using the expenditure approach, the investment component includes

• A)net investment plus depreciation.
• B)gross investment plus depreciation.
• C)fixed investment minus depreciation.
• D)net investment only.
• E)net investment minus depreciation.

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Definitions:

Salvage Value

The anticipated earnings from an asset's sale following the cessation of its useful life.

Net Cash Flow

The variance between the cash entering and leaving a business over a given timeframe.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal installments, simplifying accounting computations.

Salvage Value

The projected sale proceeds of an asset at the conclusion of its period of utility.