CFA Practice Question

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CFA Practice Question

For the purposes of calculating GDP, gross private domestic investment includes ______.

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.
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