Consumption goods, capital goods, final goods, intermediate goods

Correct answer: B. Intermediate good

Explanation: The dealer purchases the car for resale, not for personal consumption or for repeated use in producing another service. Until it is sold to the final user, it is part of the dealer’s stock of goods for sale and is treated as an intermediate transaction in the production chain. The buyer’s purpose, rather than the car’s durability, determines this classification.

Correct answer: C. Add only final goods or value added

Explanation: Double counting occurs when the value of intermediate goods is added separately even though it is already included in the price of the final product. It is avoided either by counting only final goods or by summing value added at every production stage. Adding all sales or both intermediate and final goods would inflate national income and give an incorrect total.

Correct answer: A. Intermediate consumption

Explanation: The software company purchases the cloud service as an input for delivering its own services to clients. A one-year service subscription is used during the production period and does not create a durable asset owned by the company. Therefore, the expenditure is intermediate consumption, not final consumption or fixed capital formation.

Correct answer: C. Because it is included as investment through an increase in inventories

Explanation: Finished goods produced during the year are part of current output even if they remain unsold. Their value is recorded as an increase in inventories, which is treated as inventory investment in the expenditure method. This includes production in national income and avoids omitting goods merely because the sale occurs later.

Correct answer: D. Include it in change in inventories

Explanation: Work-in-progress represents production that has begun but is not yet complete. Its value is part of the producer’s current output and is recorded through the change in inventories when it remains at the end of the accounting period. It is neither depreciation nor household consumption, so option D is correct.

Correct answer: A. A scholarship is a transfer payment, while building construction is capital formation

Explanation: A scholarship is paid without the government receiving a currently produced good or service directly in return. It is therefore a transfer payment and is excluded from national-income expenditure aggregates, although the recipient may later spend it. Construction of a new government school creates a durable public asset and is counted as government capital formation.

Correct answer: A. Because it is generally treated as a transfer-type payment

Explanation: Interest paid on public debt is generally treated in school-level national-income accounting as a transfer-type payment rather than payment for a currently produced final good or service. The government is transferring income to debt holders; it is not purchasing a new product merely by paying interest. Consequently, the interest payment is not added directly as government final consumption expenditure or capital formation. The underlying government expenditure on goods or services is counted when it occurs.

Correct answer: A. When the advertising service is used as part of production and selling costs

Explanation: When a producer purchases advertising to support production or sales, the service is an intermediate input used in the business process. Counting the producer's payment as final expenditure would double-count it, because the value of the advertising input is already reflected in the final product's value. Therefore, it is treated as an intermediate business expense rather than separately added to final expenditure.

Correct answer: A. It is included as inventory investment or capital formation

Explanation: GDP measures current production, not merely goods that have already been sold. Newly produced machinery is a capital good. If it is unsold at the end of the period, it is recorded as an addition to inventories; when intended for use as fixed capital, it represents investment in capital formation. Therefore, its current production enters GDP.

Correct answer: A. Its production was already counted in an earlier year

Explanation: GDP measures the value of goods and services produced during the current period. A used machine was produced and counted as output when it was originally manufactured, so its resale is a transfer of ownership rather than new current production. Counting its full sale price again would double-count the same production. Option A is correct. A machine can be a final capital good, it certainly may have a price, and it is not necessarily imported. A current brokerage service, however, can be included.

Correct answer: A. Because it is a service produced in the current year

Explanation: GDP records current production, including newly provided services. Although the used machine itself is not current production and its resale price is excluded from GDP, the broker performs a transaction service during the current year. The commission is the market value of that current service, so it is included in GDP. Option A is correct. The machine does not become new, brokerage is not automatically an import, and transfer payments are not all counted as output.