Question 47

An automobile produced in Country X will increase the gross domestic product (GDP) of Country X.

Producing an automobile within Country X contributes directly to its GDP, as it represents a new economic output and transaction occurring within the country's economy.

A) An automobile produced in Country X

This option is correct because the production of goods, such as automobiles, adds to the total economic output of Country X. When an automobile is manufactured, it generates value and contributes to the GDP through both the production process and subsequent sales.

B) A can of soup purchased in a previous year in Country X

This option is incorrect because the purchase of a can of soup from a previous year does not contribute to the current GDP. GDP measures economic activity within a specific time frame, so transactions that occurred in prior years are not counted in the current year's GDP.

C) Social Security benefits paid to a retiree in Country X

This option is also incorrect as Social Security benefits are transfers and do not represent payments for goods or services produced in the economy. Therefore, these benefits do not contribute to the GDP, which focuses on economic production rather than transfer payments.

D) Consumption of homegrown vegetables in Country X

This option is incorrect because while the consumption of homegrown vegetables is part of personal consumption, it does not contribute to GDP if no market transaction occurs. Homegrown produce that is not sold does not generate economic output that is counted in GDP calculations.

Conclusion

The correct answer, an automobile produced in Country X, directly adds to the country's economic output and is a key factor in GDP calculations. In contrast, the other options either reflect past transactions, transfer payments, or non-market consumption, which do not contribute to the current GDP. Thus, only option A meets the criteria for increasing GDP.