An Example of a Government Policy to Increase Physical Capital

question 122

Multiple Choice

An example of a government policy to increase physical capital formation is:

• A)the construction of an interstate highway system.
• B)government support for basic research.
• C)maintaining a well-functioning legal system.
• D)the provision of publicly-funded education.

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Definitions:

Depreciation

The reduction in the value of an asset over time, due in particular to wear and tear.

Expenditures Approach

A method of calculating GDP that totals consumption, investment, government spending, and net exports.

GDP

Gross Domestic Product, a measure of the economic performance of a country, calculating the total value of all goods and services produced over a specific time period.

Gross Investment

The total amount spent on purchases of new capital assets and replacement of depreciated assets within a specified period.