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.

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  1. Under the income approach to GDP, which of the following is a primary factor income category?

    Answer: Corporate profits, wages, and rental income

    The income approach sums factor incomes — wages/salaries, corporate profits, rental income, net interest, and proprietors' income — to arrive at GDP.

  2. Which of the following changes would REDUCE the Consumption (C) component of GDP?

    Answer: A sharp rise in the personal savings rate

    When households save more of their income, they spend less on goods and services, directly reducing the Consumption component of GDP.

  3. A municipal government builds a new public library funded by bonds. Which GDP component records this spending?

    Answer: Government Expenditure (G) as a public structure investment

    Public structures built by government entities are classified as government investment within the Government Expenditure (G) component regardless of the funding source.

  4. Which scenario illustrates 'planned inventory investment' in the Investment (I) component?

    Answer: A manufacturer deliberately stockpiles raw materials ahead of a price increase

    Deliberately building up inventory (stockpiling) is planned inventory investment, a sub-component of Gross Private Domestic Investment.

  5. The U.S. runs a current account deficit. All else equal, what does this imply about the Net Exports (NX) term in GDP?

    Answer: NX is negative, subtracting from GDP

    A current account deficit primarily reflects imports exceeding exports, making NX negative and arithmetically reducing GDP.

  6. Which of the following would be classified as a 'nondurable good' in the Consumption (C) component of GDP?

    Answer: A bag of groceries

    Nondurable goods are items expected to last fewer than three years; groceries are a classic example and are part of consumption spending.

  7. If nominal GDP rises from $20 trillion to $22 trillion but the GDP deflator also rises from 100 to 110, what happened to real GDP?

    Answer: Real GDP remained at $20 trillion

    Real GDP = Nominal GDP / (Deflator/100) = $22T / 1.10 = $20T, so all the nominal increase was due to inflation, not real output growth.