Q: If the nominal GDP in 2025 is $$10,800 and the real GDP is 8$$,400, what is the GDP deflator for 2025?

$$100 \times \frac{10,800}{8,400} = 128.6$$

Q: If the GDP deflator in 2024 is 114.6 and in 2025 is 128.6, what is the inflation rate between 2024 and 2025?

$$100 \times \frac{128.6 - 114.6}{114.6} = 12.2\%$$

Question 1

Which of the following transactions would be included in the calculation of GDP for the United States in 2024?

Accepted Answer

A U.S. company sells $1 million worth of wheat to a bakery in Canada.

Question 2

Suppose a firm in the U.S. produces $$500,000 worth of computers in 2024, but only sells 400$$,000 worth. How is the unsold inventory accounted for in GDP?

Accepted Answer

It is included in GDP as investment.

Question 3

Which of the following best describes the difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP values output using current prices, while real GDP uses base year prices.

Question 4

If the nominal GDP in 2025 is $$10,800 and the real GDP is 8$$,400, what is the GDP deflator for 2025?

Accepted Answer

$$100 	imes \frac{10,800}{8,400} = 128.6$$

Question 5

Which of the following is NOT considered a component of GDP?

Accepted Answer

Transfer payments

Question 6

A U.S. resident buys a new car manufactured in Germany. How does this transaction affect U.S. GDP?

Accepted Answer

It increases consumption but decreases net exports.

Question 7

Which formula correctly represents the calculation of GDP using the expenditure approach?

Accepted Answer

$$Y = C + I + G + EX - IM$$

Question 8

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

Accepted Answer

Flour purchased by a bakery to make bread.

Question 9

If the GDP deflator in 2024 is 114.6 and in 2025 is 128.6, what is the inflation rate between 2024 and 2025?

Accepted Answer

$$100 	imes \frac{128.6 - 114.6}{114.6} = 12.2\%$$

Question 10

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

Accepted Answer

GDP does not value leisure time.

Question 11

A government pays unemployment benefits to citizens. How is this transaction treated in GDP accounting?

Accepted Answer

It is excluded from GDP as a transfer payment.

Question 12

Which of the following would increase both nominal and real GDP, assuming prices remain constant?

Accepted Answer

An increase in the quantity of goods and services produced.

Question 13

In the circular-flow diagram, what do households provide to firms?

Accepted Answer

Factors of production

Question 14

Which of the following is included in the 'Investment' component of GDP?

Accepted Answer

Spending on new factories and equipment

Question 15

If a U.S. company builds a factory in Mexico, how is this reflected in U.S. GDP?

Accepted Answer

It is excluded from U.S. GDP because it is outside U.S. borders.

Question 16

A homeowner lives in their own house. How is this reflected in GDP?

Accepted Answer

The imputed rental value of the house is included in consumption.

Question 17

Which of the following would be excluded from GDP calculations?

Accepted Answer

A used textbook sold between students

Question 18

If nominal GDP increases by 10% and real GDP increases by 4% from one year to the next, what can be inferred about the price level?

Accepted Answer

The price level increased by 6%.

Question 19

Which of the following best explains why GDP is not a perfect measure of economic well-being?

Accepted Answer

GDP does not account for environmental degradation or income distribution.

Measuring Economic Activity: GDP, Its Components, and Limitations

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