Which of the following is not considered an economic investment in national income accounting?

Introduction / Context:
In everyday language, people use the word investment for many financial activities, especially buying stocks. However, in macroeconomics and national income accounting, economic investment has a specific meaning. It refers to spending on new capital goods or additions to inventories, not merely buying existing financial assets. This question tests your ability to distinguish between real, economic investment and financial transactions.

Given Data / Assumptions:

• We are using the macroeconomic meaning of investment, as in GDP calculations.
• Economic investment includes purchases of new capital equipment, new construction, and changes in inventories.
• Purchasing shares of an already existing company is a financial transaction, not a new capital formation.
• The options list both real investments and a stock market purchase.

Concept / Approach:
Economic investment refers to the creation or acquisition of new capital goods that will be used to produce other goods and services in the future. Examples include machines, buildings, and additions to inventories. When a grocer increases inventories, or a firm buys new machinery, or new houses are built, the capital stock of the economy increases. In contrast, when a person buys existing shares on the stock market, ownership of financial assets changes hands, but no new physical capital is created. Therefore, such a purchase is not counted as investment in GDP.

Step-by-Step Solution:
Step 1: Evaluate the piling up of inventories on a grocer's shelf. Additional inventories represent goods produced but not yet sold, so they are treated as investment. Step 2: Consider the purchase of a drill press by a manufacturing company. A drill press is a capital good used in production, so this is clearly economic investment. Step 3: Examine construction of a suburban housing project. New residential buildings add to the capital stock and are counted as investment. Step 4: Look at the purchase of 100 existing shares by a retired executive. This transaction transfers ownership of financial claims without creating new capital. Step 5: Conclude that the stock purchase is not economic investment in national income accounting terms.

Verification / Alternative check:
If every secondary market trade of shares were counted as investment, GDP would be artificially inflated by large volumes of financial transactions that do not reflect new production. Instead, only when a company issues new shares to finance actual capital spending do we count the underlying spending on machines or buildings as investment. The stock certificate itself is just a claim on future income, not a new machine. This reinforces why purchasing existing shares is excluded from economic investment.

Why Other Options Are Wrong:
Additional inventories on a grocer's shelf are included as inventory investment because they represent unsold production. Buying a drill press is investment in plant and equipment. Constructing a housing project expands the stock of residential capital. All three involve real resources and future productive capacity, so they are economic investments.

Common Pitfalls:
A frequent mistake is to equate any activity called investment in everyday speech with economic investment. Candidates may instinctively pick the stock purchase as investment because people often say they are investing in shares. To answer correctly, remember that in national income accounting, investment is tied to real capital formation, not portfolio decisions in financial markets.

Final Answer:
The transaction that is not an economic investment is the purchase of 100 shares of a company by a retired business executive on the stock market.