What is excluded in the calculation of GDP? A. Personal income B. Government transfer payments C. Exports of goods and services D. Business profits
Question
What is excluded in the calculation of GDP?
A. Personal income
B. Government transfer payments
C. Exports of goods and services
D. Business profits
Solution
The calculation of Gross Domestic Product (GDP) includes all private and public consumption, government outlays, investments, additions to private inventories, paid-in construction costs, and the foreign balance of trade (exports are added, imports are subtracted).
So, let's go through the options:
A. Personal income - This is not directly included in the calculation of GDP. GDP measures the output of an economy, not the income of individuals. However, personal income can indirectly affect GDP as it influences consumption levels.
B. Government transfer payments - These are excluded from GDP. Transfer payments are redistributions of income in the economy, not a purchase of goods and services, so they do not directly contribute to economic output.
C. Exports of goods and services - These are included in GDP. When a country exports goods and services, it is producing output that is being purchased by other countries, contributing to its GDP.
D. Business profits - These are not directly included in GDP. Like personal income, business profits can indirectly affect GDP as they influence investment levels.
So, the answer is A. Personal income and B. Government transfer payments are excluded in the calculation of GDP.
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