How does the size of investment as a fraction of GDP compare to its importance in creating economic fluctuations?
A) Investment is a small part of real GDP, and it accounts for a small share of the fluctuation in real GDP.
B) Investment is a small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.
C) Investment is a large part of real GDP, and it accounts for a large share of the fluctuation in real GDP.
D) Investment is a large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.

Question

Quizplus · Accepted Answer

Investment is typically a small portion of real GDP, but it can have a large impact on economic fluctuations. This is because investment is often tied to changes in business confidence and expectations, which can have a ripple effect on other sectors of the economy. For example, a decrease in investment can lead to decreased production, job losses, and reduced consumer spending, which can all contribute to a slowdown in economic growth. On the other hand, an increase in investment can help spur economic activity and drive growth.

How Does the Size of Investment as a Fraction of GDP