Question

Which one of the following is NOT a component in the calculation of gross domestic product?...

Which one of the following is NOT a component in the calculation of gross domestic product?

a) government purchases of goods and services

b) net exports

c) purchases by firms of new machines

d) purchases by consumers of used goods

e) purchases by consumers of durable goods

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Answer #1

GDP = Consumption + Investment + Government spending + Exports - Imports

Option A is incorrect because government spending is included in GDP.

Option B is incorrect because net exports (exports - imports) is included in GDP.

Option C is incorrect because purchase of new machine is investment for the country.

Option D is the correct option because purchase of new goods is already included in GDP. Sell and purchase of second hand items are not included in GDP as it will lead to double counting of GDP.

Option E is incorrect as it is added as conumption in GDP.

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