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Which of the following will increase the gross domestic product (GDP) of Country X?

Rationale

An automobile produced in Country X.

Producing an automobile in Country X contributes directly to the country's economic output, thereby increasing the gross domestic product (GDP). GDP measures the total value of all final goods and services produced within a nation's borders over a specific time period, making this production a clear contributor.

A (An automobile produced in Country X) CORRECT

This choice directly contributes to the GDP as the automobile is a final good produced within the confines of Country X. The value added during its production, from materials to labor, is counted in the GDP, highlighting its positive impact on the economy.

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

While the purchase of a can of soup contributes to consumption, if it was bought in a previous year, it does not affect the current GDP calculation. GDP only includes the value of goods and services produced in the current year, meaning past purchases are not counted in the current economic output.

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

Social Security benefits are considered transfer payments and do not represent the production of goods or services. While they may support consumption, they do not directly contribute to GDP, which is focused on economic output rather than income redistribution.

D (Consumption of homegrown vegetables in Country X) YOUR ANSWER

Although consumption of homegrown vegetables may support local economies, if these vegetables are not sold in a market, they do not contribute to GDP. GDP measures market transactions, and homegrown vegetables consumed without sale do not generate economic output that is recorded in GDP calculations.

Conclusion

In summary, the production of an automobile in Country X is the only choice that directly increases its GDP as it reflects measurable economic output. Other options either refer to past transactions, do not involve production, or are not counted in market transactions, highlighting the importance of new production in GDP calculations. Understanding these distinctions is essential for analyzing economic growth and activity within a country.

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