Of the Three Major Components of Investment

question 19

Multiple Choice

Of the three major components of investment,

• A) nonresidential fixed investment dominates, but inventory volatility gives it a primary role in driving the business cycle.
• B) residential fixed investment dominates and therefore plays a primary role in driving the business cycle.
• C) inventory holdings dominate, but the volatility of nonresidential fixed investment is a primary source of business cycle fluctuation in GDP.
• D) only residential fixed investment depends on real GDP and therefore has anything to do with the business cycle.
• E) none of the above.

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Definitions:

Fifteen-Year Bonds

Fixed income securities that mature or become due for repayment fifteen years after their issue date.

Capital Market

A financial market in which long-term debt or equity-backed securities are bought and sold, facilitating the raising of capital.

Interest

The cost of borrowing money, typically expressed as a percentage of the amount borrowed.

Rate Difference

The disparity in interest rates, often used in the context of comparing rates between two different financial products or within different markets.