The Dependence of Investment on the Level of GDP Is

question 39

Multiple Choice

The dependence of investment on the level of GDP is based on

• A) the fact that replacement investment is linked to the level of the capital stock and thus GDP.
• B) the fact that finished goods inventory investment is closely related to the level of GDP.
• C) the fact that unfinished goods inventory investment is closely related to the level of GDP.
• D) the fact that investment in new housing is closely tied to the level of GDP.
• E) none of the above.

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Definitions:

External Cost

Refers to the negative effects an activity imposes on unrelated third parties without compensation for the incurred costs.

Emission Fee

An emission fee is a charge levied on the quantity of pollution that a company or entity emits, designed to internalize the external costs of pollution and incentivize reduction in emissions.

Supply Curve

A graphical representation showing the relationship between the quantity of goods suppliers are willing to sell and the price of those goods.

Spillover Benefits

Spillover benefits occur when an economic activity positively affects unrelated third parties or the broader community, beyond the immediate buyer and seller.