Question

Investment is a a. small part of real GDP, so it accounts for a small share of the fluctuation in real GDP. b. small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP. c. large part of real GDP, so it accounts for a large share of the fluctuation in real GDP. d. large part of real GDP, yet it accounts for a small share of the fluctuation in real GDP.

Answer 1

Answer: Option (b) is correct.

Explanation:

Correct option: Small part of real GDP, yet it accounts for a large share of the fluctuation in real GDP.

Investment contains spending on equipment, machinery, structures and property are called as fixed investment and investment in stock. It is normally a small part of real GDP but it is responsible for the large fluctuations occur in the real GDP.

It is an important component of GDP because it increases the productivity and boosts the employment opportunities.