Question

Which of the following is not considered a consumption expenditure?

A. Purchases of services
B. Purchases of houses
C. Purchases of nondurable goods
D. Purchases of durable goods

Answer 1

Purchases of houses (B) is not considered a consumption expenditure because houses are viewed as investments; therefore, they are accounted for as residential investments in GDP, not consumption.

Step-by-step explanation:

The option that is not considered a consumption expenditure is Purchases of houses (B). Consumption expenditure is spending by households and individuals on durable goods, nondurable goods, and services. Durable goods include items that last and provide value over time, such as cars. Nondurable goods are consumed quickly, like food and drink. Services are intangible like healthcare or entertainment. The purchase of houses is not counted in consumption expenditures because houses are considered as investments, not a consumption good. Instead, they fall under residential investment when calculating Gross Domestic Product (GDP).