Which of the following is likely to lead to an increase in the GDP of a country?
A) An increase in the physical capital stock of the country
B) An increase in the unemployment rate in the country
C) An increase in the tax rates in the country
D) An increase in the interest rates in the country

Question

Quizplus · Accepted Answer

An increase in the physical capital stock of a country (such as investment in machinery, buildings, and infrastructure) is likely to lead to an increase in GDP because it can lead to an increase in productivity and output.

B, C, and D are unlikely to lead to an increase in GDP. An increase in unemployment (B) means fewer people are working and producing goods and services, leading to a decrease in GDP. An increase in tax rates (C) could reduce consumer and business spending, leading to a decrease in GDP. An increase in interest rates (D) could reduce borrowing and investment, also leading to a decrease in GDP.

Which of the Following Is Likely to Lead to an Increase