GDP - Gross Domestic Product GDP Calculation Methods Questions and Answers

Question 1

An economist is calculating a country's Gross Domestic Product (GDP) using the expenditure approach. Which of the following transactions would be included in the calculation?

Accepted Answer

A homeowner purchasing a newly built house.

Answer

A car manufacturer purchasing tires to install on new vehicles.

Answer

The government issuing social security payments to retirees.

Answer

An individual purchasing shares of stock in a publicly traded company.

Question 2

The income approach to calculating GDP sums up all the income earned by factors of production. Which of the following is NOT a component of the income approach?

Accepted Answer

Government purchases of goods and services.

Answer

Wages and salaries paid to employees.

Answer

Rental income earned by property owners.

Answer

Corporate profits before tax.

Question 3

A steel company sells steel to a bicycle manufacturer for $200. The bicycle manufacturer uses the steel to produce a bicycle, which it sells to a retailer for $500. The retailer then sells the bicycle to a customer for $700. Using the value-added approach, what is the total contribution to GDP from these transactions?

Accepted Answer

$700

Answer

$1,400

Answer

$500

Answer

$1,000

Question 4

Which of the following is explicitly excluded from the calculation of a country's Gross Domestic Product (GDP)?

Accepted Answer

The sale of illegal goods and services on the black market.

Answer

The estimated rental value of owner-occupied housing.

Answer

Services produced by the government, such as national defense.

Answer

Exports of final goods and services to other countries.

Question 5

To avoid double-counting in the calculation of GDP, economists primarily include the value of:

Accepted Answer

final goods and services only.

Answer

both final and intermediate goods.

Answer

intermediate goods only.

Answer

all raw materials used in production.

Question 6

If a country's GDP is calculated using the formula: GDP = C + I + G + (X - M), which calculation method is being used?

Accepted Answer

The Expenditure Approach

Answer

The Income Approach

Answer

The Production (Value-Added) Approach

Answer

The National Savings Approach