GDP Items Excluded from GDP 2

Question 1

Why are Social Security payments excluded from US GDP?

Accepted Answer

They are transfer payments with no new production

Answer

Social Security payments are transfer payments—money redistributed from taxpayers to recipients—and represent no new goods or services produced.

Question 2

A homeowner sells a house built in 1985 for $400,000 in 2025. How much of this transaction counts toward 2025 GDP?

Accepted Answer

$0, since the house was already counted in 1985 GDP

Answer

The house was counted in GDP when it was originally built; resales of existing homes do not represent new production and are excluded.

Question 3

Which of the following best explains why purchasing a used car is excluded from GDP?

Accepted Answer

No new value is created; it is merely a transfer of an existing asset

Answer

Buying a used car transfers ownership of an already-counted asset and adds no new production to the economy.

Question 4

Welfare benefits paid by the federal government are excluded from GDP primarily because they:

Accepted Answer

Do not correspond to any current productive activity

Answer

Welfare payments are transfer payments—income redistributed without an exchange of goods or services—so they add nothing to measured output.

Question 5

An investor buys $50,000 worth of corporate bonds. This transaction is excluded from GDP because:

Accepted Answer

It is a financial transaction involving existing securities, not new production

Answer

Buying bonds is a financial asset transfer; it does not represent production of new goods or services.

GDP - Gross Domestic Product Practice Test