Question

Id the rates increase for Fixed Investment under Gross Private Domestic Investment what does this say about the economy and why?

Answer 1

Gross private domestic investment is the measure of physical investment used in computing GDP in the measurement of nations' economic activity. This is an important component of GDP because it provides an indicator of the future productive capacity of the economy. It includes replacement purchases plus net additions to capital assets plus investments in inventories

• Fixed investment is the category that includes the capital goods that best reflects what most people consider capital investment, and it is generally about 95 to 97 percent of gross private domestic investment. This category includes factories, machinery, tools, and buildings. More specifically, fixed investment is divided into two major subcategories: nonresidential and residential.
• The nonresidential category, once again, typifies what most people think of as business investment. Coming in at just under 70 percent of gross private domestic investment and just over 70 percent of fixed investment, this subcategory includes structures (buildings, pipelines, oil wells) and producers' durable equipment (computers, machinery, vehicles). Structures are about one-fourth of nonresidential fixed investment and producers' durable equipment is about three-fourths.
• The residential category primarily includes houses and apartments, and comes in at just under 30 percent of both fixed investment and gross private domestic investment. Like nonresidential fixed investment, residential fixed investment is divided into structures and producers' durable equipment. Structures are separated into single family (houses) and multifamily (apartments). Of some importance, single family structures can be owned by either a business or an individual. In other words, the production of an owner-occupied house is included as gross private domestic investment in the National Income and Product Accounts. This is the only notable purchase made by the household sector that is not included as a personal consumption expenditure. Structures are about 98 percent of this residential category and producers' durable equipment is the remaining 2 percent.

so increase in the the rate for Fixed investment tends to affect both residential and non residential investment. As, investors now will invest less. Most of the investments will be made by govt. i.e both type of properties will be owned by public sector.

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