Future Business Leaders of America (FBLA) Securities and Investments Practice Test

What does GDP measure?

1. Total government expenditure in an economy

2. Total output of the American economy

3. Total investment by businesses in an economy

4. Total trade balance of a country

The correct answer is: Total output of the American economy

Gross Domestic Product (GDP) measures the total output of an economy, specifically the monetary value of all final goods and services produced within a country's borders over a specific period. This comprehensive metric reflects the overall economic activity and health of a country, showing how much value is being generated in terms of production and consumption. By considering various sectors such as consumer spending, business investments, government expenditures, and net exports, GDP provides a well-rounded view of economic performance. While total government expenditure, total business investment, and total trade balance are important components of economic analysis, they do not capture the entire picture of economic activity in the same way GDP does. Therefore, defining GDP as the total output of the economy encompasses all these factors, giving it a critical role in economic planning and policy-making.