Consumption, as a Component of GDP, Measures

question 4

Multiple Choice

Consumption, as a component of GDP, measures:

• A) spending on goods and services by individuals and households.
• B) spending on luxury items only.
• C) spending by the government.
• D) spending only on goods, not services, by individuals and households.

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Definitions:

Sunk Cost

Costs that have already been incurred and cannot be recovered, which should not factor into future business decisions.

Future Decisions

Choices or judgements that will be made in an upcoming period, often based on past and present information and forecasts.

Overhead Allocation

The process of spreading out fixed costs, such as salaries and utilities, across different departments or production activities within a company.

Product Cost Distortion

The inaccurate allocation of production costs to products, potentially leading to misleading cost information and pricing decisions.