Test Your Knowledge: Components of GDP (C+I+G+NX) Quiz for Students

📚 Quick Study Guide

• 🏠 Consumption (C): Represents spending by households on goods and services. This includes everything from groceries 🍎 and haircuts 💇‍♀️ to cars 🚗 and medical care 🩺. It's usually the largest component of GDP.
• 🏭 Investment (I): Refers to spending on capital goods, inventories, and structures. Think of businesses buying new equipment 💻, building new factories 🏢, or increases in unsold goods sitting in warehouses 📦. Note that financial investments (like stocks and bonds) are NOT included in GDP.
• 🏛️ Government Purchases (G): Includes spending by federal, state, and local governments on goods and services. This covers things like national defense 🚀, infrastructure projects 🚧, and public education 🏫. Transfer payments, such as Social Security or unemployment benefits, are NOT included in GDP since the government isn't receiving goods or services in return.
• 🌍 Net Exports (NX): Represents the value of a country's exports minus the value of its imports. Exports are goods and services produced domestically and sold abroad ✈️, while imports are goods and services produced abroad and purchased domestically 🚢. If a country exports more than it imports, NX is positive; if it imports more than it exports, NX is negative. The formula is $NX = Exports - Imports$.
• 🧮 GDP Formula: The formula is $GDP = C + I + G + NX$. Understanding each component helps you analyze economic activity and growth.

Practice Quiz

1. Which of the following is included in the 'Consumption' component of GDP?
   1. A) A new factory being built.
   2. B) Government spending on road repairs.
   3. C) A family buying groceries.
   4. D) An increase in a company's inventory.
2. Which of the following is included in the 'Investment' component of GDP?
   1. A) An individual purchasing shares of stock.
   2. B) A company buying new computers.
   3. C) Social Security payments.
   4. D) The purchase of foreign goods.
3. Which of the following is included in the 'Government Purchases' component of GDP?
   1. A) Unemployment benefits.
   2. B) Government spending on national defense.
   3. C) An individual buying a new car.
   4. D) A company's unsold inventory.
4. What does 'Net Exports' represent in the GDP formula?
   1. A) The total value of all goods and services produced in a country.
   2. B) The difference between a country's exports and imports.
   3. C) Government spending minus taxes.
   4. D) Consumer spending plus investment.
5. If a country's exports are $500 billion and its imports are $600 billion, what is its Net Exports?
   1. A) $1100 billion
   2. B) $100 billion
   3. C) -$100 billion
   4. D) $0 billion
6. Which of the following transactions is NOT included when calculating GDP?
   1. A) The purchase of a new house.
   2. B) The sale of a used car.
   3. C) A doctor's visit.
   4. D) A business buying office supplies.
7. If Consumption = $2 trillion, Investment = $0.5 trillion, Government Purchases = $1 trillion, and Net Exports = -$0.2 trillion, what is the GDP?
   1. A) $3.7 trillion
   2. B) $3.3 trillion
   3. C) $2.7 trillion
   4. D) $2.3 trillion