Investment spending refers to purchases of which of the following?

• A. Government services such as education and defense
• B. Stocks and bonds in financial markets
• C. Consumer goods like food and clothing
• D. New capital goods such as machinery, equipment, and buildings

Answer: (D)

Verified step by step guidance

1. Understand the definition of investment spending in macroeconomics: it refers to the purchase of new capital goods that will be used for future production.
2. Identify the types of goods and services listed in the problem: government services, financial assets (stocks and bonds), consumer goods, and new capital goods.
3. Recall that government services like education and defense are considered government spending, not investment spending.
4. Recognize that stocks and bonds are financial instruments representing ownership or debt, not physical capital goods, so they are not counted as investment spending.
5. Conclude that investment spending specifically includes purchases of new capital goods such as machinery, equipment, and buildings, which contribute to productive capacity.