Practice Test GeeksGDP - Gross Domestic Product Practice Test
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Components of GDP Flashcards

7 cards from real GDP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Components of GDP flashcards as text

  1. Which component of GDP tends to be the most volatile over the business cycle?

    Answer: Gross Private Domestic Investment (I)

    Investment is the most volatile GDP component because businesses rapidly cut capital spending during recessions and expand it during booms.

  2. In the U.S., approximately what share of GDP does personal consumption expenditure (C) typically represent?

    Answer: About 70%

    Personal consumption expenditure historically accounts for roughly 68–70% of U.S. GDP, making it the largest single component.

  3. A pharmaceutical company spends $200 million on R&D that leads to a new drug. Since 2013, how has the BEA treated this spending in GDP?

    Answer: It is counted in Investment (I) as intellectual property investment

    Since 2013, the BEA reclassified R&D spending as intellectual property investment, adding it to the Gross Private Domestic Investment component.

  4. A U.S. automaker imports $1 billion in car parts from Germany and sells finished cars domestically. How does this affect GDP components?

    Answer: Consumption rises but Net Exports fall, with no net change from the imported parts

    When finished cars are sold domestically, Consumption rises; but the imported parts increase Imports, reducing NX by an equivalent amount, netting out the foreign content.

  5. Which of the following expenditures is NOT included in GDP?

    Answer: An investor buying shares of Apple stock on the NYSE

    Purchasing existing financial assets like stocks is not production of new goods or services and therefore is not counted in GDP.

  6. How does depreciation relate to the difference between Gross Domestic Product and Net Domestic Product?

    Answer: NDP = GDP − Depreciation (Capital Consumption Allowance)

    Net Domestic Product subtracts depreciation (the capital consumption allowance) from GDP to show output after accounting for worn-out capital.

  7. A state government hires 500 new teachers and pays their salaries. Which GDP component does this primarily affect?

    Answer: Government Expenditure (G)

    State government employee compensation for public services is included in Government Expenditure (G) in the GDP expenditure approach.