Question

To understand the use of scarce resources and to study the composition of GDP (Gross Domestic Product) among various types of spending, GDP is divided into which of the following components?
(A) Consumption
(B) Investment
(C) Governement Purchases and Net Exports
(D) Governement Consumption and Net Imports
Choose the correct answer from the following.

• A. (A), (B) and (C) only
• B. (B) and (C) only
• C. (A), (B), (C) and (D)
• D. (C) and (D) only

Hint:

The key components of GDP are Consumption, Investment, Government Spending, and Net Exports.

Answer 1

The Correct Option is A

GDP is divided into four main components:
Consumption (A): Spending by households on goods and services.
Investment (B): Spending on capital goods to produce future outputs.
Government Purchases and Net Exports (C): Expenditures by the government and the net difference between exports and imports.
Government consumption and net imports (D) is not a standard component of GDP.