Future Business Leaders of America (FBLA) Advertising Practice test

What is the primary component of gross domestic product (GDP)?

1. A) value of imports

2. B) total consumer spending

3. C) taxation revenue

4. D) government expenditure

The correct answer is: B) total consumer spending

The primary component of gross domestic product (GDP) is total consumer spending. GDP measures the economic output of a country and is commonly calculated using the expenditure approach, which sums various components. In this approach, consumer spending, also known as personal consumption expenditures, accounts for a significant portion of GDP. It reflects the total amount spent by households on goods and services, making it a vital indicator of economic health. Total consumer spending includes spending on durable goods, nondurable goods, and services, and it generally drives demand in the economy. A strong consumer spending level can lead to higher production levels, job creation, and increased income, which all contribute to economic growth. While government expenditure and taxation revenue are important aspects of the overall economy, they are not the primary driver of GDP. Import values, while relevant to the overall trade balance, do not directly contribute to domestic economic activity measured by GDP. Therefore, focusing on total consumer spending emphasizes the role of individuals in driving economic growth and reflects the collective purchasing power within the economy.