Q:

How does 32-bit address 4GB if 2³² bits = 4 Billion bits not Bytes?

Essentially, how does 4Gb turn into 4GB? If the memory is addressing Bytes, should not the possibilities be 2(32/8)?

A:

It depends on how you address the data.
If you use 32 bits to address each bit, you can address 232 bits or 4Gb = 512MB. If you address bytes like most current architectures it will give you 4GB.
But if you address much larger blocks you will need less bits to address 4GB. For example if you address each 512-byte block (2^9 bytes) you can address 4GB with 23 bits. FAT16 uses 16 bits to address (maximum) 64KB clusters and therefore can address a maximum 4GB volume. The same is used in Java Compressed Oops where you can address 32GB of memory with 32-bit reference.
Some older architectures even use word-addressable memory instead of byte like most do nowadays. Modern architectures that have a minimum addressable unit bigger than an octet are mainly found in DSPs. There also a few architectures with bit-addressable memory like Intel 8051

