Multiple Choice
In the GDP accounts, production equals which of the following?
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10. Measuring National Output and Income
Expenditure Approach for Measuring GDP
Multiple Choice
Which of the following transactions is included in GDP when using the expenditure approach?
A
A person buys shares of stock issued by a corporation
B
A household purchases an existing (previously owned) home
C
A retiree receives Social Security payments
D
A household purchases a newly built home
Verified step by step guidance1
Understand that GDP (Gross Domestic Product) measures the market value of all final goods and services produced within a country during a specific period.
Recall that the expenditure approach to GDP sums consumption (C), investment (I), government spending (G), and net exports (NX), i.e., \(GDP = C + I + G + NX\).
Identify which transactions represent current production of goods or services: buying newly produced goods or services counts, while financial transactions or transfers do not.
Analyze each option: buying shares of stock is a financial transaction (not production), Social Security payments are transfer payments (not production), purchasing an existing home is a transfer of an asset (no new production), but buying a newly built home counts as investment (new production).
Conclude that only the purchase of a newly built home is included in GDP via the expenditure approach because it reflects current production and investment.
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