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My AP macroeconomics teacher ran through some examples today of what transactions would or would not be counted in GDP. He gave examples, among others, of a person cashing a social security check (would not be counted), a factory investing in production equipment (would be counted as Investment), paying 800 dollars per month to rent an apartment (counted as Consumption), and paying a contractor 150,000 dollars for a home built this year (counted as Investment). He made the distinction between a transaction counting towards GDP for Consumption or for Investment and so my immediate question was, why did the home count as Investment and not Consumption? His best answer was that the book said so. This is deeply unsatisfying. Does anyone know why this is the case?

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marked as duplicate by Herr K., Community Feb 12 at 16:46

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