Question 1

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

Accepted Answer

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

Question 2

Why are only final goods and services included in the calculation of GDP?

Accepted Answer

To avoid double counting the value of intermediate goods.

Question 3

Suppose Bob the Lumberjack sells a log to Lumber Co for $$1, Lumber Co sells plywood to Christine for 10$$, and Christine sells a finished cornhole board for $100. What is the contribution to GDP from these transactions?

Accepted Answer

$100

Question 4

Which of the following is NOT included in the calculation of U.S. GDP?

Accepted Answer

A car produced in Mexico by a U.S. company.

Question 5

Which equation correctly represents the expenditure approach to calculating GDP?

Accepted Answer

$$GDP = C + I + G + X - M$$

Question 6

If consumption expenditure ($$C) is$$ $$8,000$$, investment ($$I) is$$ $$2,000$$, government expenditure ($$G) is$$ $$3,000$$, exports ($$X) $$are $$1,000$$, and imports ($$M) $$are $$2,000$$, what is GDP?

Accepted Answer

$$GDP = 8,000 + 2,000 + 3,000 + 1,000 - 2,000 = 12,000$$

Question 7

Which of the following best explains why nominal GDP can be misleading when comparing economic output over time?

Accepted Answer

Nominal GDP does not account for changes in the price level (inflation or deflation).

Question 8

How is real GDP calculated?

Accepted Answer

By valuing current year quantities at base year prices.

Question 9

If a country’s real GDP increases but its population grows even faster, what happens to real GDP per person?

Accepted Answer

It decreases.

Question 10

Which of the following is an example of government expenditure ($$G) in $$GDP?

Accepted Answer

The government builds a new highway.

Question 11

Suppose the following data for a country: $$C = 5,000$$, $$I = 1,500$$, $$G = 2,000$$, $$X = 800$$, $$M = 1,200. If $$aggregate income ($$Y) is $$unknown, how can you solve for $$Y$$?

Accepted Answer

$$Y = C + I + G + X - M$$

Question 12

Which of the following is a limitation of using real GDP as a measure of economic well-being?

Accepted Answer

It does not account for household production or underground economic activity.

Question 13

Why is real GDP at purchasing power parity (PPP) a better measure for comparing standards of living across countries than real GDP at market exchange rates?

Accepted Answer

PPP adjusts for differences in price levels between countries.

Question 14

Which of the following would cause net exports ($$X - M) to be $$negative for a country?

Accepted Answer

The country imports more than it exports.

Question 15

If gross investment is $$1,000$$ and depreciation is $$200$$, what is net investment?

Accepted Answer

$$800$$

Question 16

Which of the following best describes the business cycle?

Accepted Answer

The irregular pattern of expansions and recessions in real GDP over time.

Question 17

A Big Mac costs $$5.79 in the US and 26.50 yuan in China (about 3.95 at $$the current exchange rate). What does this example illustrate about comparing standards of living using real GDP?

Accepted Answer

Price differences across countries can make real GDP comparisons misleading.

Question 18

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

Accepted Answer

A parent cooking dinner for their family.

Question 19

If the base year for real GDP calculation is 1980, what is a major limitation when measuring the value of new goods invented after 1980?

Accepted Answer

There are no base year prices for new goods, making it difficult to value them in real GDP.

Chapter 4

Guida di studio - Domande di pratica

Study guide - Flashcard