Understanding GDP through the Expenditure Approach

The video explains the expenditure approach to GDP, breaking it down into consumption, investment, government spending, and net exports. It uses examples to illustrate how different transactions affect GDP. Investments by firms in physical capital increase GDP, while imports offset investments, having no net impact. Exports increase GDP, while stock purchases and transfer payments do not affect GDP. The video emphasizes understanding these distinctions for accurate GDP calculation.

Which of the following is NOT a component of the expenditure approach to GDP?

• Consumption by households

• Investment by firms

• Government transfer payments

• Net exports

When a U.S. firm buys a U.S.-made robot for its factory, which GDP component increases?

• Consumption

• Government spending

• Net exports

• Investment

Which of the following scenarios would increase the investment component of GDP?

• A company buying foreign stocks

• A household buying groceries

• A firm purchasing new machinery

• A government paying salaries

If a U.S. car rental company buys cars made in Japan, what is the net effect on GDP?

• GDP increases

• GDP decreases

• No impact on GDP

• GDP doubles

How does the purchase of U.S.-made cars by a Japanese company affect U.S. GDP?

• Decreases consumption

• Increases net exports

• Increases investment

• No impact on GDP

Why does buying stocks not affect GDP?

• It is considered consumption

• It is a transfer of ownership, not production

• It increases government spending

• It is counted as net exports

What is the GDP impact of Microsoft buying IBM stock?

• No impact on GDP

• Doubles GDP

• Decreases GDP

• Increases GDP

Which of the following is considered a government expenditure on goods and services?

• Social Security payments

• Paying off national debt

• Subsidies to farmers

• Buying a new accounting system

Why do transfer payments not count towards GDP?

• They increase net exports

• They are a form of consumption

• They are not related to production

• They are considered investment

What happens to GDP when the government buys new software?

• GDP remains unchanged

• GDP increases

• GDP decreases

• GDP doubles