There have been times during which changes in investment have not produced changes in GDP. For that to happen, as it did in 1986, a reduction in investment must be accompanied by which of the following?
A) An increase in consumption expenditure
B) An increase in government expenditure
C) An increase in net exports
D) A reduction in net imports
E) Any of the above

Question

Quizplus · Accepted Answer

For GDP to remain unchanged despite a reduction in investment, there must be an offsetting increase in another component of GDP, such as consumption expenditure, government expenditure, net exports, or a reduction in net imports. Each of these changes can compensate for the decrease in investment, keeping the overall GDP stable.

There Have Been Times During Which Changes in Investment Have