Q: If nominal GDP in 2010 was $$14,000$$ and real GDP (in 2005 dollars) was $$13,000$$, what is the GDP deflator for 2010?

$$\frac{14,000}{13,000} \times 100 = 107.7$$

Question 1

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

Accepted Answer

The final market value of all goods and services produced within a nation’s borders during a specific period.

Question 2

Which of the following transactions would be included in the calculation of GDP for the United States in a given year?

Accepted Answer

A farmer’s purchase of a new tractor.

Question 3

Suppose the following data for a simple economy: Consumption = $$10,246$$ billion, Investment = $$1,795$$ billion, Government Purchases = $$3,003$$ billion, Net Exports = $$-517$$ billion. What is the value of GDP?

Accepted Answer

$$Y = C + I + G + NX = 10,246 + 1,795 + 3,003 - 517 = 14,527$$

Question 4

Which of the following is NOT a shortcoming of GDP as a measure of total production?

Accepted Answer

GDP includes the value of illegal activities in the underground economy.

Question 5

If nominal GDP in 2010 was $$14,000$$ and real GDP (in 2005 dollars) was $$13,000$$, what is the GDP deflator for 2010?

Accepted Answer

$$\frac{14,000}{13,000} 	imes 100 = 107.7$$

Question 6

Which of the following best explains why GDP per capita may not accurately reflect the well-being of a country’s citizens?

Accepted Answer

GDP per capita does not measure the distribution of income among citizens.

Question 7

Which of the following is an example of an intermediate good?

Accepted Answer

A tire sold to a car manufacturer for use in a new car.

Question 8

If the value of exports is $$1,840$$ billion and the value of imports is $$2,357$$ billion, what is the value of net exports?

Accepted Answer

$$1,840 - 2,357 = -517$$

Question 9

Which of the following would cause real GDP to increase, holding prices constant?

Accepted Answer

An increase in the quantity of final goods and services produced.

Question 10

Which of the following best describes the business cycle?

Accepted Answer

The alternating increases and decreases in economic activity over time.

Question 11

Suppose a country’s nominal GDP increased by 5% from one year to the next, but its real GDP increased by only 2%. What does this imply?

Accepted Answer

The price level in the economy increased.

Question 12

Which of the following is NOT included in the calculation of GDP using the expenditure approach?

Accepted Answer

Government transfer payments.

Question 13

A country has a large informal sector (underground economy). What is a likely consequence for its measured GDP?

Accepted Answer

Measured GDP will understate the country’s actual production.

Question 14

Which of the following is an example of household production that is NOT included in GDP?

Accepted Answer

A mechanic fixing his own car.

Question 15

If real GDP in 2013 is calculated using 2005 prices, which of the following statements is true?

Accepted Answer

Real GDP in 2013 reflects the quantities of 2013 and the prices of 2005.

Question 16

Which of the following would be counted as investment in GDP?

Accepted Answer

A household’s purchase of a new house.

Question 17

If the GDP deflator in 2015 is 120 and nominal GDP is $$18,000$$ billion, what is real GDP?

Accepted Answer

$$\frac{18,000}{120} 	imes 100 = 15,000$$

Question 18

Which of the following best explains why developing countries often have large underground economies?

Accepted Answer

High taxes and extensive government regulations.

Question 19

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

Accepted Answer

Steel purchased by a car manufacturer.

Question 20

If the economy is in a recession, which phase of the business cycle is it experiencing?

Accepted Answer

Contraction

Gross Domestic Product: Measuring Total Production and Income

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