Which transactions are excluded from GDP?

Resales of second-hand goods, transfer payments and intermediate products: the good was counted when first built, the transfer involves no production, and intermediate value would be double counted.

Why can total GDP rise while living standards do not improve?

GDP is a total; if the population grows at the same pace, output per person may be unchanged, and distribution and environmental costs are not captured.

S4 Economics National Income Practice Paper 4 | Expenditure approach, income approach and per-capita GDP, 10 questions with answers

2026-11-01

Tutor Prep Guide · Secondary Economics

The fourth set of ten national income questions, from the expenditure and income approaches and the GNP conversion through the deflator, real growth, value added and per-capita GDP, each with an answer and a one-line explanation.

Direct answers This paper has 10 questions covering the expenditure and income approaches, the GNP conversion, the deflator, real growth, value added and per-capita GDP; suggested time is 20 minutes.

01 Paper details (check answers afterwards)

Item	Detail
Questions	10
Suggested time	20 minutes
Difficulty mix	Foundation 3 · Intermediate 4 · Challenge 2 · Error redo 1
Chapter	S4 Economics: National Income
Level	S4 (DSE)

02 Questions (10 items)

FoundationWhich of these transactions are excluded from GDP: a resold second-hand flat, a social security payment, an intermediate product?
FoundationWhat is the difference between nominal GDP and real GDP?
FoundationWhat is the relationship between GNP (GNI) and GDP?
IntermediateConsumption is HK$180 billion, investment HK$45 billion, government spending HK$60 billion, exports HK$120 billion and imports HK$105 billion. What is GDP by the expenditure approach?
IntermediateWages are HK$160 billion, rent HK$35 billion, interest HK$25 billion, profit HK$65 billion and depreciation HK$15 billion. What is GDP by the income approach?
IntermediateFollowing the previous question, if net factor income from abroad is +HK$12 billion, what is GNP?
IntermediateNominal GDP is HK$300 billion and the deflator is 120. What is real GDP?
ChallengeReal GDP rises from HK$238 billion to HK$250 billion. What is the real growth rate?
ChallengeA farmer sells wheat for $120, a miller sells flour for $300 and a retailer sells bread for $480. What is GDP by the value-added approach, and with a population of 5 million what is per-capita GDP?
Error redoWhat is wrong with the claim that an increase in GDP means everyone’s income rises?

03 Answers and one-line notes

#	Answer	One-line note
1	None of the three is counted.	The flat was counted when it was built, the payment involves no production, and the intermediate product would be double counted.
2	Nominal GDP is at current-year prices; real GDP is at constant base-year prices.	Comparing output across years requires real GDP.
3	GNP = GDP + net factor income from abroad.	Net factor income is what residents earn abroad minus what foreign firms earn here.
4	HK$300 billion.	180 + 45 + 60 + 15, with net exports of HK$15 billion.
5	HK$300 billion.	It matches the expenditure figure, showing both methods give the same number.
6	HK$312 billion.	300 plus 12, because residents earn more abroad than foreign firms earn here.
7	HK$250 billion.	300 divided by 1.2 removes the price increase.
8	About 5.0%.	The increase of HK$12 billion divided by the original HK$238 billion, times 100%.
9	GDP is $480; per-capita GDP is HK$60,000.	Value added is 120, 180 and 180, totalling 480; 300 billion divided by 5 million gives 60,000.
10	GDP is a total; population growth and income distribution also matter, and real GDP per head reflects average living standards better.	If the total rises but the population rises with it, output per person may not improve at all.

04 What to do after marking

After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
Repeat the same item two days later; move to the next paper only when both attempts are correct.
Parents only need the answer and note columns; there is no need to explain every item.

Complete the ten questions under time, then check every answer against its explanation.Tutor Registration →

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