Question

which of the following factors are considered when calculating gdp?

i. goods produced within a country by citizens of that country
ii. goods produced within a country by residents who are not citizens
iii. goods produced within a country for use in production of other goods
iv. goods produced by a countrys citizens outside of its borders

a. ii and iii
b. i only
c. i and ii
d. i, ii, iii, and iv

Explanation:

Define Gross Domestic Product (GDP)

Using the Gross Domestic Product knowledge point
Gross Domestic Product (GDP) measures the total market value of all final goods and services produced within a country's borders during a specific period, regardless of the producer's nationality.

Analyze statements I and II

Using the GDP vs GNP knowledge point

• Statement I: Goods produced within a country by citizens of that country are included in GDP because production occurs within the country's borders.
• Statement II: Goods produced within a country by residents who are not citizens are also included in GDP because the physical production takes place within the country's borders.

Analyze statements III and IV

Using the Gross Domestic Product and GDP vs GNP knowledge points

• Statement III: Goods used in the production of other goods are intermediate goods. GDP only counts final goods to avoid double counting, so intermediate goods are excluded.
• Statement IV: Goods produced by a country's citizens outside its borders are excluded from GDP (they are counted in Gross National Product, or GNP, instead).

Determine the correct option

Using the Gross Domestic Product knowledge point
Since only statements I and II are included in the calculation of GDP, the correct choice is option c.

Answer:

• a. II and III
• b. I only
• c. I and II (Correct answer)
• d. I, II, III, and IV