GDP - Gross Domestic Product Components of GDP Questions and Answers

Question 1

Which of the following transactions would be included in the calculation of a country's Gross Domestic Product (GDP)?

Accepted Answer

A homeowner purchasing a new lawnmower from a local retailer.

Answer

A stockbroker selling 100 shares of an existing company's stock.

Answer

The government issuing social security checks to retirees.

Answer

A collector purchasing a rare, antique painting.

Question 2

A domestic company manufactures and sells a new line of advanced robotics to a firm in another country. How would this transaction be recorded in the GDP expenditure formula (GDP = C + I + G + NX)?

Accepted Answer

It would increase Net Exports (NX).

Answer

It would increase Investment (I).

Answer

It would decrease Net Exports (NX).

Answer

It would increase Consumption (C).

Question 3

The government of Country B recently spent $50 billion on constructing new highways and bridges. This expenditure would be classified under which component of GDP?

Accepted Answer

Government Purchases (G)

Answer

Investment (I)

Answer

Consumption (C)

Answer

Net Exports (NX)

Question 4

Which of the following is considered part of the 'Investment' (I) component in the GDP calculation?

Accepted Answer

A family purchasing a newly built house.

Answer

A person buying a corporate bond.

Answer

A company paying its employees' salaries.

Answer

A household buying a new car for personal use.

Question 5

A U.S. consumer buys a new smartphone that was manufactured in South Korea. How does this purchase affect the U.S. GDP components?

Accepted Answer

Consumption (C) increases, and Net Exports (NX) decreases.

Answer

Consumption (C) increases, and Net Exports (NX) remains unchanged.

Answer

Consumption (C) decreases, and Net Exports (NX) increases.

Answer

There is no net change in GDP, so no components are affected.

Question 6

Why are government transfer payments, such as unemployment benefits, excluded from the Government Purchases (G) component of GDP?

Accepted Answer

Because they represent a redistribution of income, not a payment for currently produced goods or services.

Answer

Because they are paid to individuals, not firms.

Answer

Because they are fiscally unsustainable for the government in the long term.

Answer

Because they are already included in the Investment (I) component.