Gross private domestic investment, which consists of _____ and changes in private inventories, is an important determinant of _____.
A) investment in stocks and bonds; inflation
B) fixed investments; swings in the business cycle
C) fixed investments; trade deficits
D) investment in stocks and bonds; trade deficits

Question

Quizplus · Accepted Answer

Gross private domestic investment consists of fixed investments and changes in private inventories. Fixed investments, which include spending on equipment, structures, and software, are a significant determinant of swings in the business cycle. Changes in private inventories can also impact the business cycle as they represent the difference between the amount of goods produced and the amount sold, which can influence future production and investment decisions. Options A and D are incorrect as investment in stocks and bonds are not components of gross private domestic investment. Option C is incorrect as trade deficits are not directly influenced by gross private domestic investment.

Gross Private Domestic Investment, Which Consists of _____ and Changes