- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 10. Aggregate Output, Prices, and Economic Growth
- Subject 2. The Components of GDP and Related Measures
CFA Practice Question
For the purposes of calculating GDP, gross private domestic investment includes ______.
B. purchases of stock and/or government bonds
C. purchases of new automobiles
A. the value of new residential construction
B. purchases of stock and/or government bonds
C. purchases of new automobiles
Correct Answer: A
Investment does not include the purchase of stocks or bonds, which are considered saving, not investing.
User Contributed Comments 12
| User | Comment |
|---|---|
| sharon | I took C and got wrong. Don't understand why A. |
| KD101 | Residential Construction is an Inventory that's why |
| jdfoy | See p. 161 of Econ. Text |
| lna1717 | financial approach for this item for US GDP computation. Just to remember it. |
| hinchung | There is a depreciation of a new automobiles |
| stefdunk | C falls under personal consumption expenditure, not gross private domestic investment |
| Sid99 | and when my company buys the cars? |
| lemur6666 | company ? question says "private" |
| thbo | I think a company is "private" in the meaning of non-government. So if a company buys a car, in my opinion these expenditures are gross private domestic investment. |
| dave79 | Just to add as per macroeconomics, items such as buying stockes,bonds etc is called as savings. Automobiles buying falls under consumption but not under investment |
| whiteknight | so investment will mean creating something new. as in the other cases the goods are only changing hands, hence its not investment.. |
| ericczhang | If a company makes a purchase and it can be capitalized as an asset, I'd imagine it would be counted in gross private investment. So a company investment in cars would count in gross private investment part of GDP. Stuff like blue sky R&D expenses, for example, wouldn't be included in GDP gross private investment since it can't be capitalized. |