Question:
Which of the following expenditures would be included in the calculation of gross fixed capital formation?
(1) Buying a newly constructed house
(2) Buying a new luxury car
(3) Buying 1000 shares of stock of a manufacturing company
(4) Commission paid to a stock broker for selling stocks
(5) Money spent on corn cultivation in a five hectare plot of land
Correct Answer:
(1)
Answer Explanation:
In National Income Accounting, “Gross Fixed Capital Formation” represents investment in physical assets that will be used for future production. While household purchases are usually “Consumption,” the purchase of a newly constructed residential house is strictly classified as a Capital Investment. Shares are mere financial transfers.
Topic: National Income Year: 2017
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