Q: If nominal GDP in 2025 is $$20 trillion and real GDP in 2025 (using 2015 as the base year) is 18 $$trillion, what is the GDP deflator for 2025?

$$\frac{20}{18} \times 100 = 111.1$$

Question 1

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

Accepted Answer

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

Question 2

Why are intermediate goods excluded from the calculation of GDP?

Accepted Answer

Because their value is already included in the value of final goods, and including them would result in double counting.

Question 3

Which of the following transactions would be included in the calculation of U.S. GDP for 2025?

Accepted Answer

A Japanese company produces and sells computers in California.

Question 4

Which equation correctly represents the expenditure approach to calculating GDP?

Accepted Answer

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

Question 5

Suppose a bakery buys flour for $$100, pays 200 in $$wages, and sells bread for $500. What is the value added by the bakery?

Accepted Answer

$$400$$

Question 6

Which of the following is NOT a shortcoming of GDP as a measure of economic well-being?

Accepted Answer

GDP includes the value of environmental degradation.

Question 7

If nominal GDP in 2025 is $$20 trillion and real GDP in 2025 (using 2015 as the base year) is 18 $$trillion, what is the GDP deflator for 2025?

Accepted Answer

$$\frac{20}{18} 	imes 100 = 111.1$$

Question 8

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

Accepted Answer

Spending by firms on new factories and equipment.

Question 9

A U.S. firm produces shoes in Vietnam and sells them in Europe. How is this production counted in national income accounting?

Accepted Answer

It is included in Vietnam's GDP and U.S. GNP.

Question 10

Which of the following best explains why GDP per capita is often used as a measure of standard of living?

Accepted Answer

It reflects the average market value of goods and services available to each person.

Question 11

If the government increases its purchases of goods and services, which component of the GDP equation increases?

Accepted Answer

$$G$$

Question 12

Which of the following would be considered part of the underground economy and therefore not included in official GDP statistics?

Accepted Answer

A plumber is paid cash for a home repair and does not report the income.

Question 13

Which of the following is the correct formula for the income approach to GDP?

Accepted Answer

$$Y = w + i + r + p$$

Question 14

If a country’s GDP is $$25,744 billion and its national income is 21$$,678 billion, what accounts for the difference?

Accepted Answer

The difference is due to depreciation.

Question 15

Which of the following is an example of a final good?

Accepted Answer

A car purchased by a household.

Question 16

Suppose in 2025, the quantity of eggs produced is 95,000 dozen at $$5.00 per dozen, and the quantity of eye exams is 110 at 100 $$each. What is the nominal GDP for eggs and eye exams in 2025?

Accepted Answer

$$95,000 	imes 5.00 + 110 	imes 100 = 475,000 + 11,000 = 486,000$$

Question 17

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

Accepted Answer

Purchases of used goods.

Question 18

If disposable personal income is less than personal income, what accounts for the difference?

Accepted Answer

Taxes

Question 19

Which of the following best explains why net exports can be negative for a country?

Accepted Answer

The country imports more goods and services than it exports.

Measuring Total Production and Income: Understanding GDP and National Income Accounting

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