Measuring the Size of the Economy: Gross Domestic Product

Self-Check Questions

Country A has export sales of $20 billion, government purchases of $1,000 billion, business investment is $50 billion, imports are $40 billion, and consumption spending is $2,000 billion. What is the dollar value of GDP?


GDP is C + I + G + (X – M). GDP = $2,000 billion + $50 billion + $1,000 billion + ($20 billion – $40 billion) = $3,030

Which of the following are included in GDP, and which are not?

  1. The cost of hospital stays
  2. The rise in life expectancy over time
  3. Child care provided by a licensed day care center
  4. Child care provided by a grandmother
  5. A used car sale
  6. A new car sale
  7. The greater variety of cheese available in supermarkets
  8. The iron that goes into the steel that goes into a refrigerator bought by a consumer.


  1. Hospital stays are part of GDP.
  2. Changes in life expectancy are not market transactions and not part of GDP.
  3. Child care that is paid for is part of GDP.
  4. If Grandma gets paid and reports this as income, it is part of GDP, otherwise not.
  5. A used car is not produced this year, so it is not part of GDP.
  6. A new car is part of GDP.
  7. Variety does not count in GDP, where the cheese could all be cheddar.
  8. The iron is not counted because it is an intermediate good.