Q: Suppose in 2020, Canada’s Nominal GDP was $$2,206,764 million and Real GDP (using 2012 as the base year) was 2$$,000,000 million. What was the GDP Deflator for 2020?

$$\frac{2,206,764}{2,000,000} \times 100 = 110.34$$

Q: If the GDP Deflator increases from 110 to 115 in one year, what is the approximate rate of inflation as measured by the GDP Deflator?

$$\frac{115 - 110}{110} \times 100 = 4.55\%$$

Question 1

Which of the following transactions would be included in the calculation of Canada’s GDP using the Expenditures Approach?

Accepted Answer

A Canadian company sells $1 million worth of wheat to a bakery in France.

Question 2

Suppose in 2020, Canada’s Nominal GDP was $$2,206,764 million and Real GDP (using 2012 as the base year) was 2$$,000,000 million. What was the GDP Deflator for 2020?

Accepted Answer

$$\frac{2,206,764}{2,000,000} 	imes 100 = 110.34$$

Question 3

Which of the following best explains why GDP per capita may not accurately reflect the standard of living in a country?

Accepted Answer

GDP per capita does not account for income inequality, non-market activities, or environmental costs.

Question 4

A Canadian clothing manufacturer produces $$500,000 worth of jackets in 2022. 400$$,000 worth are sold domestically, $$50,000 are exported, and 50$$,000 remain unsold in inventory. According to the Expenditures Approach, what is the value added to GDP from this production?

Accepted Answer

$$500,000 ($$all produced output, including inventory, counts toward GDP)

Question 5

Which of the following is NOT included in the calculation of GDP using the Expenditures Approach?

Accepted Answer

The purchase of government bonds by a household

Question 6

If Canada’s GDP is $2,206,766 million and its population aged 15+ is 42 million, what is the GDP per capita?

Accepted Answer

$$\frac{2,206,766}{42} = 52,542$$

Question 7

Which of the following best describes the difference between GDP and GNP?

Accepted Answer

GDP measures output produced within a country’s borders, while GNP measures output produced by a country’s residents regardless of location.

Question 8

A bakery buys flour for $$10,000, uses it to bake bread, and sells the bread for 25$$,000. What is the value added by the bakery to GDP?

Accepted Answer

$$25,000 - 10,000 = 15,000$$

Question 9

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 value of unpaid work such as volunteer activities.

Question 10

If the GDP Deflator increases from 110 to 115 in one year, what is the approximate rate of inflation as measured by the GDP Deflator?

Accepted Answer

$$\frac{115 - 110}{110} 	imes 100 = 4.55\%$$

Question 11

Which of the following best describes the difference between the GDP Deflator and the Consumer Price Index (CPI)?

Accepted Answer

The GDP Deflator includes all goods and services produced domestically, while the CPI includes only a fixed basket of consumer goods, including imports.

Question 12

Suppose a country’s Nominal GDP grew by 5% and its Real GDP grew by 2% in a given year. What was the approximate rate of inflation as measured by the GDP Deflator?

Accepted Answer

3\% (Nominal GDP growth minus Real GDP growth)

Question 13

Which of the following is an example of a transfer payment that is excluded from GDP calculations?

Accepted Answer

Employment Insurance (EI) benefits paid to unemployed individuals

Question 14

If a Canadian company owned by Americans produces $$100 million worth of goods in Canada, and a Canadian company produces 50 $$million worth of goods in the United States, how much is added to Canada’s GDP and GNP, respectively?

Accepted Answer

GDP: $$100 million; GNP: 100 $$million - $$0 + 50 $$million = $150 million

Question 15

Which of the following best explains why unanticipated high inflation can arbitrarily redistribute wealth?

Accepted Answer

It reduces the real value of money owed, benefiting borrowers at the expense of lenders.

Question 16

A small business owner’s income is classified as 'Net Mixed Income' in the Income Approach to GDP. Which of the following best describes why?

Accepted Answer

Small business owners do not separate their labour and capital income, so both are included in Net Mixed Income.

Question 17

If the cost of a fixed basket of goods was $$1,000 in the base year and 1$$,200 in the current year, what is the Consumer Price Index (CPI) for the current year?

Accepted Answer

$$\frac{1,200}{1,000} 	imes 100 = 120$$

Question 18

Which of the following adjustments must be made to Net Domestic Product at factor cost (NDPfc) to arrive at Gross Domestic Product at market prices (GDPmp) using the Income Approach?

Accepted Answer

Add depreciation and net indirect taxes (indirect taxes minus subsidies)

Question 19

Which of the following would cause Actual Expenditures (AEa) to be greater than GDP in a given year?

Accepted Answer

Businesses sell more than they produce, drawing down inventories.

Measuring National Income: GDP, Economic Indicators, and Price Indices

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