GDP Items Excluded from GDP 4

Question 1

A landlord sells an apartment building originally constructed in 2010. What portion of the 2025 sale price is included in 2025 GDP?

Accepted Answer

None; the structure was counted when built in 2010

Answer

The sale of existing real estate is a transfer of a previously produced asset; only new construction is included in GDP.

Question 2

Which of the following is the best example of a non-market activity excluded from GDP?

Accepted Answer

A person mows their own lawn instead of hiring a landscaper

Answer

Self-provided services like personal lawn care have no market transaction and therefore no recorded price, excluding them from GDP.

Question 3

Government unemployment insurance payments are excluded from GDP because they:

Accepted Answer

Are transfer payments not tied to current production

Answer

Unemployment benefits transfer income to individuals without requiring the production of goods or services, making them a transfer payment excluded from GDP.

Question 4

An economist notes that GDP undercounts true economic welfare partly because it excludes:

Accepted Answer

Household production such as cooking and cleaning

Answer

Household production adds real value to people's lives but lacks market prices, causing GDP to understate total economic well-being.

Question 5

Which item would be excluded when calculating GDP using the expenditure approach?

Accepted Answer

A $200 billion federal student loan disbursement (financial transfer)

Answer

Federal loan disbursements are financial transfers that provide purchasing power but do not themselves represent purchases of new goods or services.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP Items Excluded from GDP 4