Which of the following is not included in GDP?
a. capital goods such as machinery
b. imports
c. the value of domestically produced services
d. government purchases of goods and services
e. the construction of structures
Answer: b. imports
The alternative that should be accounted for, as well, when it comes to the calculation of GDP (Gross Domestic Product) is exports.
GDP/GNP is calculated as the nominal value of all final goods and services produced within a country in any particular year by a resident producer.It includes:
a. Goods of capital (e.g. machinery) are one of the primary areas of investment of company funds.
c. The importance of various types of services not only as returns that domestic manufacturers receive but also as results of the activity in sectors including health care, education, finance, and others.
d. Governments (Governments) when make purchases of goods and services
e. The erection of buildings (houses and other structures)
Although imports representing goods and services obtained in other countries and brought into home market, however is not taken into account in GDP. Imports subtractions are calculated as part of the domestic value added when calculating GDP because they do not showcase as domestic economic activity.
GDP puts a spotlight on a country’s domestic production while importing incurs no credit, hence avoiding double counting in order to present a true picture of a country’s economic output.