"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?
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.
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The collapse of the Bretton Woods system marked
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