Self-Check Questions
Country A has export sales of $20 billion, government purchases of $1,000 billion, business investment is $50 billion, imports are $40 billion, and consumption spending is $2,000 billion. What is the dollar value of GDP?
Hint:
GDP is C + I + G + (X – M). GDP = $2,000 billion + $50 billion + $1,000 billion + ($20 billion – $40 billion) = $3,030
Which of the following are included in GDP, and which are not?
- The cost of hospital stays
- The rise in life expectancy over time
- Child care provided by a licensed day care center
- Child care provided by a grandmother
- A used car sale
- A new car sale
- The greater variety of cheese available in supermarkets
- The iron that goes into the steel that goes into a refrigerator bought by a consumer.
Hint:
- Hospital stays are part of GDP.
- Changes in life expectancy are not market transactions and not part of GDP.
- Child care that is paid for is part of GDP.
- If Grandma gets paid and reports this as income, it is part of GDP, otherwise not.
- A used car is not produced this year, so it is not part of GDP.
- A new car is part of GDP.
- Variety does not count in GDP, where the cheese could all be cheddar.
- The iron is not counted because it is an intermediate good.