Q: Which equation is used to calculate the percentage change in GDP?

$$\frac{(\text{New value} - \text{Old value})}{\text{Old value}} \times 100$$

Question 1

Which of the following best describes Gross Domestic Product (GDP)?

Accepted Answer

The market value of all final goods and services produced in a country during a period of time.

Question 2

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

The value of tires sold to an automobile manufacturer for use in new cars.

Question 3

Suppose a country produces only three goods: video games, automobiles, and pedicures. If the quantities and prices for the current year are: 100 video games at $$50 each, 100 automobiles at 20$$,000 each, and 50 pedicures at $40 each, what is the nominal GDP?

Accepted Answer

$2,007,000

Question 4

Which formula correctly represents the expenditure approach to calculating GDP?

Accepted Answer

$$Y = C + I + G + NX$$

Question 5

If a country exports $$500 billion worth of goods and imports 600 $$billion, what is its net exports component for GDP?

Accepted Answer

$$-100$$ billion

Question 6

Which of the following is a shortcoming of GDP as a measure of well-being?

Accepted Answer

GDP does not capture leisure and human costs.

Question 7

Real GDP differs from nominal GDP in that real GDP:

Accepted Answer

Is measured using base-year prices and adjusts for inflation.

Question 8

Given the following data, calculate the real GDP for the current year using base-year prices: Video games: 100 units, base-year price $$60; Automobiles: 100 units, base-year price 18$$,000; Pedicures: 50 units, base-year price $30.

Accepted Answer

$$1,803,000$$

Question 9

Which of the following would increase GDP but not necessarily improve societal well-being?

Accepted Answer

A rise in pollution due to increased industrial production.

Question 10

If real GDP in 2023 is $$22,723.7$$ billion and in 2024 is $$23,358.4$$ billion, what is the GDP growth rate from 2023 to 2024?

Accepted Answer

$$2.79\%$$

Question 11

Which of the following is NOT a component of GDP according to the expenditure approach?

Accepted Answer

Household production

Question 12

Why are intermediate goods, such as tires sold to automobile manufacturers, excluded from GDP calculations?

Accepted Answer

To avoid double counting, since their value is included in the final good.

Question 13

Which of the following would be counted in GDP?

Accepted Answer

A new house built and sold during the year.

Question 14

Which equation is used to calculate the percentage change in GDP?

Accepted Answer

$$\frac{(	ext{New value} - 	ext{Old value})}{	ext{Old value}} 	imes 100$$

Question 15

Which of the following is an example of a government purchase included in GDP?

Accepted Answer

A government employee's salary.

Question 16

Why might GDP per capita not accurately reflect the standard of living in a country?

Accepted Answer

It does not account for income distribution or non-market activities.

Question 17

Which of the following is a reason why GDP might underestimate total production in an economy?

Accepted Answer

It excludes household production and the underground economy.

Question 18

If a country has a high nominal GDP but a low GDP per capita, what does this suggest?

Accepted Answer

The country has a large population.

Question 19

Which of the following would NOT be considered a final good in GDP calculations?

Accepted Answer

Flour sold to a bakery for making bread.

Question 20

Which of the following best explains why real GDP is preferred over nominal GDP for measuring economic growth?

Accepted Answer

Real GDP adjusts for inflation, allowing for comparison across years.

GDP: Measuring Total Production and Income – Study Notes

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