Approximately what percentage of gross domestic product (GDP) is typically allocated to investment in most developed economies?

• A. 60-70%
• B. 5-10%
• C. 15-20%
• D. 40-50%

Answer: (C)

Verified step by step guidance

1. Understand that Gross Domestic Product (GDP) is composed of several components, including consumption, investment, government spending, and net exports. Investment here refers to spending on capital goods that will be used for future production.
2. Recall that in most developed economies, consumption usually makes up the largest portion of GDP, often around 60-70%, while investment is a smaller but significant share.
3. Recognize that investment typically includes business expenditures on equipment, structures, residential construction, and changes in inventories.
4. Use macroeconomic data or standard economic references which show that investment usually accounts for about 15-20% of GDP in developed countries, reflecting moderate but steady capital formation.
5. Compare the given options with this typical range to identify that the correct answer is the range closest to 15-20%, as it aligns with common economic data for developed economies.