Describe how the investment component of GDP is distinct from the other components
What will be an ideal response?
Investment is distinct from consumption in that the goods are not used up in the current period, but rather survive into at least one subsequent period as final goods awaiting sale, as intermediate goods awaiting further processing, as capital goods that will be used in the production of other goods, or as residences. They are purchases by households and businesses, rather than government. Some investments involve purchase of imports, but these are subtracted in the net export component, so that only domestic production is counted in GDP.
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A) appreciated; appreciated B) appreciated; depreciated C) depreciated; appreciated D) depreciated; depreciated
One of the ways of coping with the principal-agent problem is
A) giving orders. B) providing incentive pay. C) shirking. D) using only short-term contracts.