GDP Items Excluded from GDP 5

Question 1

Which of the following financial activities is excluded from GDP?

Accepted Answer

A bank lending $1 million to a small business

Answer

Bank lending creates a financial asset and liability but does not itself produce goods or services; it is a financial transaction excluded from GDP.

Question 2

A hobbyist grows vegetables in her backyard garden and consumes them. This activity is excluded from GDP because:

Accepted Answer

It is non-market production with no observable price

Answer

Home-grown food consumed by the producer is non-market output with no transaction price, leaving it outside the scope of standard GDP measurement.

Question 3

Capital gains earned when an investor sells appreciated stock are excluded from GDP because they:

Accepted Answer

Reflect price changes on existing assets, not new production

Answer

Capital gains represent increases in the market value of existing assets; they do not reflect the creation of new goods or services.

Question 4

Foreign remittances sent by US immigrants to family abroad are excluded from US GDP because:

Accepted Answer

They are transfer payments that do not purchase US-produced goods or services

Answer

Remittances are private transfers of income; they do not represent payment for newly produced domestic output and are therefore excluded from US GDP.

Question 5

A city auctions a government-owned parking lot to a private developer for $5 million. How does this sale affect GDP?

Accepted Answer

It does not affect GDP because it is a transfer of an existing asset

Answer

Selling an existing public asset is an asset transfer, not production; only the new construction the developer undertakes afterward would be added to GDP.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP Items Excluded from GDP 5