Which factor could indicate an increase in GDP?

Study for the SQA National 5 Economics Exam. Engage with flashcards and multiple choice questions, each featuring hints and comprehensive explanations. Prepare confidently for your exam!

An increase in GDP is often associated with higher levels of economic activity. Increased consumption of goods and services is a direct indicator of this activity. When consumers buy more goods and services, it typically reflects greater confidence in the economy, which leads to increased production to meet this demand. This rise in production fuels economic growth, resulting in a higher GDP.

Consumer spending is a critical component of GDP calculations in many economies, particularly those driven by demand. Thus, when consumption rises, it not only boosts the businesses supplying those goods and services but also often leads to increased employment and investment, further stimulating economic growth.

Other factors presented, such as higher levels of unemployment, declining exports, and stagnant production levels, would typically signify economic challenges rather than growth. Higher unemployment usually correlates with reduced consumer spending and lower production levels, while declining exports indicate a weakening demand for a country's goods abroad, negatively affecting GDP.

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