Q: If the nominal GDP in 2022 is $$\21$$,000$$ and the real GDP in 2022 (using 2015 as the base year) is $$\$$20,000$$, what is the GDP deflator for 2022?

$$\frac{21,000}{20,000} \times 100 = 105$$

Q: Suppose the Consumer Price Index (CPI) was 120 in 2021 and 126 in 2022. What is the inflation rate between 2021 and 2022?

$$\frac{126 - 120}{120} \times 100 = 5\%$$

Q: Given the following data for a simple economy: 10 apples at $$2 each, 5 oranges at 3 $$each, and 2 loaves of bread at $4 each, what is the nominal GDP?

$$10 \times 2 + 5 \times 3 + 2 \times 4 = 20 + 15 + 8 = 43$$

Q: If the CPI basket in the base year costs $$\500$ and in the current year costs $$\$$600$$, what is the CPI for the current year?

$$\frac{600}{500} \times 100 = 120$$

Question 1

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

Accepted Answer

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

Question 2

If the nominal GDP in 2022 is $$\21$$,000$$ and the real GDP in 2022 (using 2015 as the base year) is $$\$$20,000$$, what is the GDP deflator for 2022?

Accepted Answer

$$\frac{21,000}{20,000} 	imes 100 = 105$$

Question 3

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

Accepted Answer

The purchase of a used car from a friend.

Question 4

Suppose the Consumer Price Index (CPI) was 120 in 2021 and 126 in 2022. What is the inflation rate between 2021 and 2022?

Accepted Answer

$$\frac{126 - 120}{120} 	imes 100 = 5\%$$

Question 5

Which of the following best explains why real GDP is a better measure of economic growth than nominal GDP?

Accepted Answer

Real GDP adjusts for changes in the price level, while nominal GDP does not.

Question 6

If a country’s GDP increases due to higher production of goods and services, but the population also increases at the same rate, what happens to GDP per capita?

Accepted Answer

GDP per capita remains unchanged.

Question 7

Which of the following is an example of investment as counted in GDP?

Accepted Answer

A business purchasing new machinery for its factory.

Question 8

Given the following data for a simple economy: 10 apples at $$2 each, 5 oranges at 3 $$each, and 2 loaves of bread at $4 each, what is the nominal GDP?

Accepted Answer

$$10 	imes 2 + 5 	imes 3 + 2 	imes 4 = 20 + 15 + 8 = 43$$

Question 9

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

Accepted Answer

An increase in the price level.

Question 10

If the CPI basket in the base year costs $$\500$ and in the current year costs $$\$$600$$, what is the CPI for the current year?

Accepted Answer

$$\frac{600}{500} 	imes 100 = 120$$

Question 11

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

Accepted Answer

GDP does not account for the distribution of income among residents of a country.

Question 12

If nominal GDP grows by 8% and the GDP deflator increases by 5%, what is the approximate growth rate of real GDP?

Accepted Answer

3\%

Question 13

Which of the following best describes the business cycle?

Accepted Answer

The short-term fluctuations in economic activity, such as employment and production.

Question 14

If the price of imported oil rises, how will this most likely affect the Consumer Price Index (CPI) and the GDP deflator?

Accepted Answer

CPI will increase more than the GDP deflator.

Question 15

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

Accepted Answer

A loaf of bread sold to a consumer at a grocery store.

Question 16

If a country’s real GDP per capita increases, which of the following must be true?

Accepted Answer

The average standard of living in the country has increased.

Question 17

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

Accepted Answer

Transfer payments such as Social Security.

Question 18

If the GDP deflator in 2021 is 110 and in 2022 is 121, what is the inflation rate between these years?

Accepted Answer

$$\frac{121 - 110}{110} 	imes 100 = 10\%$$

Question 19

Which of the following would be counted in the calculation of U.S. GDP for 2022?

Accepted Answer

A car produced in the U.S. in 2022 and sold in Canada.

Question 20

If the nominal GDP in 2020 is $$\18$$,000$$ and the real GDP in 2020 is $$\$$15,000$$, what is the GDP deflator for 2020?

Accepted Answer

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

Macroeconomics Study Notes: GDP, Economic Growth, and Measuring National Output

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