GDP Calculation Methods 3

Question 1

How does the Bureau of Economic Analysis (BEA) treat inventory accumulation in GDP calculations?

Accepted Answer

It is counted as part of gross private investment

Answer

Changes in business inventories are included in the investment (I) component of GDP because production occurred in the current period even if goods are not yet sold.

Question 2

In GDP accounting, 'net exports' equal negative $200 billion. This means:

Accepted Answer

Imports exceeded exports by $200 billion

Answer

Net exports = Exports − Imports; a negative value indicates a trade deficit where imports exceed exports.

Question 3

Which adjustment converts GDP to GNP (Gross National Product)?

Accepted Answer

Add income earned abroad by residents, subtract income earned domestically by foreigners

Answer

GNP = GDP + income received by U.S. residents from abroad − income paid to foreign residents in the U.S.

Question 4

Consumption of fixed capital (depreciation) is subtracted from GDP to arrive at:

Accepted Answer

Net Domestic Product (NDP)

Answer

NDP = GDP − Consumption of Fixed Capital (depreciation), giving a measure of net economic output after accounting for capital wear.

Question 5

In the production approach, an intermediate good is defined as:

Accepted Answer

A good used as an input in producing another good or service

Answer

Intermediate goods are inputs consumed in the production process and are excluded from GDP to avoid double-counting.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP Calculation Methods 3