Discussion
Which one of the following statements is CORRECT in the context of Gross Domestic Product (GDP) calculation?
Answer: B
The correct statement is GDP includes government consumption expenditure.
On the expenditure side, \(GDP = C + I + G + (X - M)\): government final consumption expenditure, such as salaries of public servants and purchases of goods and services, is one of the components.
The others misstate the national accounting rules. Unpaid domestic work (cooking, cleaning and care within one's own household) lies outside the production boundary and is excluded. Rent on owner-occupied houses is included: the accounts impute the rent the owner would otherwise pay. Goods produced for own consumption, such as a farm household eating its own grain, are also included at an imputed value.
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