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Author Question: When you purchase 1,000 of stock in Microsoft, your purchase is an investment and hence is part of ... (Read 105 times)

asan beg

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on: Jun 29, 2018
When you purchase 1,000 of stock in Microsoft, your purchase is an investment and hence is part of GDP. Is this assertion correct? Explain your answer.
 
  What will be an ideal response?

Question 2

In the figure above, the shift in the aggregate demand curve from AD1 to AD2 could be result of
 
  A) an increase in government expenditures on goods and services.
  B) a decrease in the quantity of money.
  C) a rise in the price level.
  D) a fall in the price level.
  E) an increase in taxes.


randomguy133

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The assertion is incorrect. Your purchase of 1,000 of Microsoft stock does not increase GDP because it is the purchase of a financial asset. The investment component of GDP is the purchase of new capital goods. Your purchase of stock is not the purchase of a new capital good and hence, as a purely financial transaction, it is not included in GDP.

Answer to Question 2

A


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