GDP Calculation 2

Question 1

Using the expenditure approach, which formula correctly represents GDP?

Accepted Answer

GDP = C + I + G + (X - M)

Answer

GDP equals Consumption plus Investment plus Government spending plus Net Exports (Exports minus Imports).

Question 2

A country has consumption of $800B, investment of $200B, government spending of $300B, exports of $150B, and imports of $180B. What is GDP?

Accepted Answer

$1,470B

Answer

$800B + $200B + $300B + ($150B - $180B) = $1,470B.

Question 3

In the income approach, which of the following is NOT typically included in GDP calculation?

Accepted Answer

Transfer payments

Answer

Transfer payments like Social Security are not included because they do not represent production of goods or services.

Question 4

The value-added method calculates GDP by summing:

Accepted Answer

The value added at each stage of production

Answer

To avoid double-counting, GDP sums only the value added at each production stage, not total sales.

Question 5

If a baker buys $2 of flour and sells $5 of bread, what is the value added by the baker?

Accepted Answer

$3

Answer

Value added equals the selling price minus the cost of intermediate goods: $5 - $2 = $3.

GDP - Gross Domestic Product Practice Test