GDP Calculation 4 — Questions and Answers
Question 1: Which of the following would INCREASE U.S. GDP?
- A U.S. factory produces and sells $50M in goods domestically (Correct answer)
- A U.S. citizen buys stock in a foreign company
- The government sends Social Security checks to retirees
- A used car dealer sells a 5-year-old vehicle for $20,000
Correct answer: A U.S. factory produces and sells $50M in goods domestically
Newly produced and sold goods count in GDP; stock purchases, transfer payments, and used-good sales do not.
Question 2: Country X has wages of $500B, profits of $200B, rent of $80B, and net interest of $50B. Using the income approach, what is GDP (ignoring adjustments)?
- $830B (Correct answer)
- $780B
- $750B
- $880B
Correct answer: $830B
Income approach GDP = Wages + Profits + Rent + Interest = $500B + $200B + $80B + $50B = $830B.
Question 3: If a country's exports are $300B and imports are $400B, net exports equal:
- -$100B (Correct answer)
- $100B
- $700B
- -$700B
Correct answer: -$100B
Net exports (NX) = Exports - Imports = $300B - $400B = -$100B, indicating a trade deficit.
Question 4: Inventory investment is classified under which GDP component?
- Gross Private Domestic Investment (I) (Correct answer)
- Government Expenditures (G)
- Net Exports (NX)
- Personal Consumption (C)
Correct answer: Gross Private Domestic Investment (I)
Changes in business inventories count as investment because they represent output produced but not yet sold.
Question 5: If nominal GDP is $15T and real GDP is $13T (base year = 2012), the GDP deflator is approximately:
- 115.4 (Correct answer)
- 86.7
- 100.0
- 128.0
Correct answer: 115.4
GDP Deflator = (Nominal / Real) × 100 = ($15T / $13T) × 100 ≈ 115.4.
Question 6: Which statement about government transfer payments and GDP is correct?
- Transfer payments are excluded because they are not payments for current production (Correct answer)
- Transfer payments are included under Government Expenditures (G)
- Transfer payments boost GDP directly through the income approach
- Transfer payments count only if recipients spend them on goods
Correct answer: Transfer payments are excluded because they are not payments for current production
Transfer payments (e.g., welfare, Social Security) represent redistribution, not new production, so they are excluded from GDP.
Question 7: If C = $10T, I = $3T, G = $4T, X = $2T, M = $2.5T, what is GDP?
- $16.5T (Correct answer)
- $17T
- $19.5T
- $16T
Correct answer: $16.5T
GDP = $10T + $3T + $4T + ($2T - $2.5T) = $10T + $3T + $4T - $0.5T = $16.5T.
GDP Calculation 4
Which of the following would INCREASE U.S.
GDP?