Answer to Question #27128 in Macroeconomics for Rishi Baig

Question

Ali buys for himself a house (9 years old).
Saleem built a brand new house.
An automobile company sells Rs. 100 Billion in a Stock and builds a new car factory in Lahore.

Which one of the above investments is included in GDP? Why?

Answer 1

First deal is personal consumption, so it is not an investment.
Second deal is also personal consumption, but in another form, as the house is
built for personal use.
And only the third is an investment and is included in GDP, because building of
a new factory is investing money to produce new output and the money for it is
collected from savings of the population.