Question 1

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

Accepted Answer

Transfer payments such as Social Security and unemployment benefits

Question 2

Suppose a country has the following annual data: Consumption = $$10 trillion, Investment = 3 $$trillion, Government Purchases = $$4 trillion, Exports = 2 $$trillion, Imports = $3 trillion. What is the country's GDP?

Accepted Answer

$14 trillion

Question 3

In the circular flow model, which of the following best describes the role of households?

Accepted Answer

Households supply factors of production and purchase final goods and services

Question 4

Which formula correctly represents GDP using the expenditure approach?

Accepted Answer

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

Question 5

If a U.S. company builds a new factory, which GDP component does this spending fall under?

Accepted Answer

Business fixed investment

Question 6

Why are inventories included in the investment component of GDP?

Accepted Answer

Inventories represent goods produced but not yet sold, reflecting future consumption or investment

Question 7

Which of the following is an example of a financial investment, NOT a capital investment?

Accepted Answer

Buying shares of stock in a car company

Question 8

If the U.S. imports more goods than it exports, what is the effect on net exports and GDP?

Accepted Answer

Net exports are negative, which decreases GDP

Question 9

Which of the following would be excluded from GDP calculations?

Accepted Answer

A Social Security payment to a retired individual

Question 10

A household purchases a new refrigerator. Under which GDP category is this transaction recorded?

Accepted Answer

Durable goods in personal consumption expenditures

Question 11

Which statement best explains why every dollar paid for a final good becomes a dollar of income for someone?

Accepted Answer

The value of final goods equals the sum of all incomes earned in their production

Question 12

Which of the following is a reason why transfer payments are excluded from government purchases in GDP?

Accepted Answer

Transfer payments do not correspond to the purchase of a good or service

Question 13

If inventories increase during a year, how does this affect GDP?

Accepted Answer

It increases GDP because unsold goods are counted as investment

Question 14

Which of the following best describes the difference between capital investment and financial investment?

Accepted Answer

Capital investment creates new productive assets; financial investment transfers ownership of existing assets

Question 15

A country has the following GDP components: $$C = 8$$, $$I = 2$$, $$G = 3$$, $$X = 4$$, $$M = 5 ($$all in trillions). Calculate GDP.

Accepted Answer

$$Y = 8 + 2 + 3 + (4 - 5) = 12$$

Question 16

Which of the following is a key reason why informal transactions are not captured in official GDP statistics?

Accepted Answer

They are not recorded and therefore cannot be measured accurately

Question 17

If a country has a trade deficit, what does this mean for its net exports?

Accepted Answer

Net exports are negative because imports exceed exports

Question 18

Which of the following would be considered a government investment in GDP?

Accepted Answer

Construction of a new highway

Question 19

Which of the following is an example of a non-durable good in personal consumption expenditures?

Accepted Answer

A loaf of bread

Question 20

Why must the value of final goods produced equal the value of income generated in an economy?

Accepted Answer

Because every output generates a dollar of income for someone

Measuring GDP and the Circular Flow in Macroeconomics

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