Figure 6-2 shows a spending flow model where both consumption and investment goods are being produced. Use the figure to answer questions .
Figure 6-2
-Refer to Figure 6-2. The purchase of a new tractor by Farmer Brown is:
A) classified as gross private investment and the flow is represented by 5.
B) classified as gross private investment and the flow is represented by 2.
C) classified as consumption and the flow is represented by 5.
D) classified as consumption and the flow is represented by 1.

Question

Figure 6-2 shows a spending flow model where both consumption and investment goods are being produced. Use the figure to answer questions .
Figure 6-2 
-Refer to Figure 6-2. The purchase of a new tractor by Farmer Brown is:
A) classified as gross private investment and the flow is represented by 5. 
B) classified as gross private investment and the flow is represented by 2. 
C) classified as consumption and the flow is represented by 5. 
D) classified as consumption and the flow is represented by 1.

Quizplus · Accepted Answer

The purchase of a new tractor by Farmer Brown is classified as gross private investment because it is an investment in a capital good (tractor) that will be used to produce crops in the future. The flow representing gross private investment is represented by arrow 2 in the spending flow model.

Figure 6-2 Shows a Spending Flow Model Where Both Consumption