Question 9 Gross domestic product during a period is measured by adding (1) expenditures on new final goods and services produced domestically. (2) the market value of all goods and services produced domestically and then (3) factor payments made by domestic firms minus retained earnings and indirect business taxes. (4) incomes received by households minus the sale of factor services supplied domestically.

Gross Domestic Product (GDP) measures the total value of all **final** goods and services produced within a country's borders during a specific period. It can be calculated using three primary approaches: the **expenditure approach**, the **income approach**, and the **production (output) approach**. Let's analyze each of the provided statements in this context: 1. **Expenditures on new final goods and services produced domestically.** - **Correct.** This aligns with the **expenditure approach** to GDP, which sums up consumption (C), investment (I), government spending (G), and net exports (exports minus imports, X - M): \[ \text{GDP} = C + I + G + (X - M) \] 2. **The market value of all goods and services produced domestically and then...** - **Partially Correct but Incomplete.** This statement touches upon the **production (output) approach**, which calculates GDP by adding the value added at each stage of production across all sectors of the economy. However, the phrase ends with "and then," making it incomplete. As presented, it's not fully accurate. 3. **Factor payments made by domestic firms minus retained earnings and indirect business taxes.** - **Incorrect.** GDP is not calculated by simply subtracting retained earnings and indirect business taxes from factor payments. The **income approach** to GDP involves summing all incomes earned by factors of production, including wages, rents, interests, and profits, and adding taxes minus subsidies on production and imports. 4. **Incomes received by households minus the sale of factor services supplied domestically.** - **Incorrect.** This statement misrepresents the **income approach**. GDP includes all incomes received by households and firms without such subtractions. Factor services supplied domestically contribute to GDP rather than being subtracted from it. **Conclusion:** Among the provided statements, **statement (1)** accurately describes one of the primary methods to measure GDP—the **expenditure approach**. **Statement (2)** is partially correct but incomplete, while **statements (3) and (4)** do not correctly represent standard GDP measurement methods. **Best Answer:** Statement (1) is correct. GDP is measured by adding expenditures on new final goods and services produced domestically.