Suppose that a firm spends $200,000 to build a factory in 2012 that is expected to have a life of 10 years.As a result,GDP in 2012 will increase by:
A)$20,000
B)$200,000
C)You need to know the selling price of the factory to answer this question.
D)It depends upon the tax law regarding depreciation.

Question

Quizplus · Accepted Answer

The construction of the factory is considered to be an investment in fixed capital, which is included in GDP. Therefore, the GDP will increase by the amount of the investment, which is $200,000 in this case.

Suppose That a Firm Spends $200,000 to Build a Factory