The immediate effect of a purchase of a government bond on the gross domestic product (GDP)is_____.
A)a decrease in consumption
B)an increase in government spending
C)an increase in investment
D)a decrease in investment
E)nonexistent,since no real goods and services have been produced

Question

Quizplus · Accepted Answer

The purchase of a government bond does not directly affect GDP because it is a financial transaction and does not involve the production of goods or services. GDP measures the value of all final goods and services produced within a country's borders in a given time period, and financial transactions like buying bonds do not count towards this measure.

The Immediate Effect of a Purchase of a Government Bond