Question

The graph shows the percentage changes in the investment rate and the gross domestic product (GDP) between 2008 and 2012.

Answer 1

The first alternative is correct (A).

The investment rate is an accounting identity that reflects the percentage of investment in the product of an economy. It is, therefore, a measure that is strongly associated with the performance of the economy. At times when the investment rate is high, production is high. The reverse is true.

The graph shows that in a downturn in investment, reflecting the 2008 crisis, the economy shrank in 2009. As the investment rate recovered, the economy followed the same path.

In other words, we can say that investment is an important economic indicator.

Answer 2

The correct answer is A.

The GDP (Gross Domestic Product) is the agggregate demand of a country, which is defined as the total amount of goods and services that are produced in a certain economy during a specific period of time, typically one year. The GDP is constituted by the following components:

GDP = C + I + G + XN

where,

• C: household consumption
• I: private investment
• G: public spending
• XN: net exports (exports - imports)

Therefore, investment is one of the components of GDP that affects to its figure positively. The higher the level of investment, the higher the resulting GDP figure.