The dependence of investment on the level of GDP is based on
A) the fact that replacement investment is linked to the level of the capital stock and thus GDP.
B) the fact that finished goods inventory investment is closely related to the level of GDP.
C) the fact that unfinished goods inventory investment is closely related to the level of GDP.
D) the fact that investment in new housing is closely tied to the level of GDP.
E) none of the above.

Question

Quizplus · Accepted Answer

Replacement investment is necessary to maintain the capital stock, which is directly related to the level of GDP, as it ensures the continuation of production capacity.

The Dependence of Investment on the Level of GDP Is