GDP Components of GDP 5

Question 1

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

Accepted Answer

Corporate profits, wages, and rental income

Answer

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

Question 2

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

Accepted Answer

A sharp rise in the personal savings rate

Answer

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

Question 3

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

Accepted Answer

Government Expenditure (G) as a public structure investment

Answer

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

Question 4

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

Accepted Answer

A manufacturer deliberately stockpiles raw materials ahead of a price increase

Answer

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

Question 5

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

Accepted Answer

NX is negative, subtracting from GDP

Answer

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

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP Components of GDP 5