Question:
Which of the following household purchases will be counted as a component of gross private investment in estimating country’s Gross Domestic Product using expenditure approach?
(1) Sovereign bonds.
(2) Shares of a company.
(3) Debentures issued by an investment bank.
(4) A new car for personal use.
(5) A newly constructed house.
Correct Answer:
(5)
Answer Explanation:
In National Income Accounting, most household purchases (like a car) are classified as “Consumption.” Financial assets (bonds, shares) are merely transfers of wealth and are not counted at all. However, the purchase of a newly constructed residential house is strictly classified as a Capital Investment (Gross Fixed Capital Formation).
Topic: National Income Year: 2019
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