Question : Which component of GDP includes government spending on infrastructure and defense?
Option 1: Consumption expenditure
Option 2: Investment expenditure
Option 3: Government expenditure
Option 4: Net exports
Correct Answer: Government expenditure
Solution : The correct answer is (c) Government expenditure.
Government expenditure is the component of GDP that includes government spending on goods and services. This spending encompasses various areas, including infrastructure projects such as roads, bridges, and public facilities, as well as defense and security expenditures.
Government expenditure is a significant component of GDP because it represents the portion of total spending within an economy that is directly attributed to the government. It includes both consumption expenditure by the government, such as salaries of public employees and purchases of goods and services for public use, and investment expenditure, which refers to government spending on capital goods and infrastructure development.
While consumption expenditure represents the spending by households on goods and services, and investment expenditure represents spending by businesses on capital goods, it is the government expenditure component that captures the spending by the government sector. This includes infrastructure development, defense, education, healthcare, public transportation, and other public services that contribute to economic activity and the overall GDP of a country.
Question : Which of the following is a component of investment expenditure?
Option 1: Consumption
Option 2: Government expenditure
Option 3: Net exports
Option 4: Business fixed investment
Question : In an open economy, aggregate demand is estimated as:
Option 1: Private consumption expenditure
Option 2: Private consumption expenditure + Government expenditure
Option 3: Private investment expenditure + Private consumption expenditure + Government expenditure
Option 4: Private consumption expenditure + Private investment expenditure + Government expenditure + Net exports
Question : The expenditure method of calculating GDP includes the sum of ______.
Option 1: Consumption, investment, government expenditure, and net exports
Option 2: Wages, rent, interest, and profit
Option 3: Output of all sectors in the economy
Option 4: Depreciation and indirect taxes
Question : Aggregate demand in a two sector model involves-
Option 1: Consumption and investment
Option 2: Investment and net exports
Option 3: Net exports and consumption
Option 4: Consumption and government
Question : ____________ refers to the total expenditure incurred by all private firms on capital goods.
Option 1: Private final consumption expenditure.
Option 2: Government final consumption expenditure.
Option 3: Investment expenditure.
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