Question

1 The components of total spending are

A.consumption, investment,​ exports, and imports.

B.consumption, investment, government​ spending, and net exports.

C.consumption, imports,​ investment, and the money supply.

D.investment, intermediate​ goods, and factors of production.

2 Why are imports subtracted when GDP is calculated in the expenditure​ approach?

A.They are produced​ abroad, and GDP only counts domestic production.

B.They do not go through formal markets and thus cannot be counted in GDP.

C.They are not part of consumption in the domestic economy.

D.They are valued in currencies other than the domestic currency.

3 Net national product​ (NNP) is:

A.the amount of goods and services that the private sector can consume during the year.

B.gross domestic product minus depreciation of capital stock.

C.the amount of goods and services that a nation can consume during the year.

D.gross national product minus consumption of fixed capital.

Answer 1

1). Option B. Together these are written as C + I + G + NX and they form aggregate expenditure. Money supply is not an expenditure. Imports are subtracted from exports so NX or net exports are taken.

2) Option A. GDP includes the money spend in producing the goods domestically while imports are not produced but purchased from abroad.

3) Option D. First GDP is computed. Then Net factor income is added to make it GNP. From GNP, depreciation (CFC) is reduced and we get NNP.