GDP Calculation Methods 2

Question 1

In the expenditure approach to GDP, which component represents government spending on goods and services?

Accepted Answer

Government consumption and investment (G)

Answer

In the expenditure approach, G includes all government purchases of goods and services but excludes transfer payments like Social Security.

Question 2

Which of the following is subtracted in the expenditure approach to GDP?

Accepted Answer

Imports

Answer

Imports are subtracted in GDP = C + I + G + (X - M) because they represent spending on foreign-produced goods.

Question 3

Under the income approach, what does 'net operating surplus' primarily represent?

Accepted Answer

Corporate profits and self-employment income

Answer

Net operating surplus captures profits earned by corporations and income earned by self-employed individuals.

Question 4

The value-added method avoids double-counting by summing only:

Accepted Answer

The difference between output value and input costs at each stage

Answer

Value added at each stage equals the value of output minus the value of intermediate inputs purchased from other firms.

Question 5

A U.S. bakery buys $500 of flour and sells $1,200 of bread. What is its contribution to GDP using the value-added method?

Accepted Answer

$700

Answer

Value added = $1,200 (output) − $500 (intermediate input) = $700, which is the bakery's unique contribution to GDP.

GDP - Gross Domestic Product Practice Test