Question 1

Which of the following best explains why only final goods and services are counted in GDP, and not intermediate goods?

Accepted Answer

Including intermediate goods would result in double counting, as their value is already embodied in the final goods.

Question 2

Suppose a bakery buys flour for $$0.65 from a miller, who bought wheat for 0.30 $$from a farmer. The bakery sells bread to a grocer for $$1.00, and the grocer sells it to the final consumer for 1.20. $$What is the total value added at all stages of production?

Accepted Answer

$1.20

Question 3

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

Accepted Answer

Intermediate goods purchased by businesses

Question 4

If nominal GDP in 2012 was $$16,197 billion and the price index (GDP deflator) was 100, while in 2019 nominal GDP was 21$$,428 billion and the price index was 123.3, what was the real GDP in 2019 (in 2012 dollars)? Use the formula $$ 	ext{Real GDP} = \frac{	ext{Nominal GDP}}{	ext{Price Index}} 	imes 100 .$$

Accepted Answer

$$17,381$$ billion

Question 5

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

Accepted Answer

The GDP deflator reflects the prices of all goods and services in GDP, while the CPI reflects only the bundle purchased by households.

Question 6

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

Accepted Answer

GDP does not account for the value of leisure time.

Question 7

If the price index in a city is 200 and the national average is 100, what does this imply about the cost of living in that city?

Accepted Answer

The cost of living in the city is twice the national average.

Question 8

Which of the following is included in the resource cost-income approach to measuring GDP?

Accepted Answer

Compensation of employees

Question 9

If real GDP per capita increases over time, which of the following must be true?

Accepted Answer

The average standard of living is rising.

Question 10

Suppose the CPI increases from 120 to 126 over one year. What is the annual rate of inflation? Use the formula $$ 	ext{Inflation Rate} = \frac{	ext{CPI}_{	ext{new}} - 	ext{CPI}_{	ext{old}}}{	ext{CPI}_{	ext{old}}} 	imes 100 .$$

Accepted Answer

5%

Question 11

Which of the following would NOT be counted in this year’s U.S. GDP?

Accepted Answer

A used computer sold on an online marketplace.

Question 12

If the GDP deflator in 2012 is 100 and in 2019 is 123.3, what is the percentage increase in the price level over this period? Use the formula $$ \frac{123.3 - 100}{100} 	imes 100 .$$

Accepted Answer

23.3%

Question 13

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

Accepted Answer

Bread purchased by a consumer at a grocery store.

Question 14

Why might real GDP per capita comparisons across long time periods be biased?

Accepted Answer

They do not account for changes in leisure, work environment, and new technologies.

Question 15

Which of the following is a component of GDP in the expenditure approach?

Accepted Answer

Net exports

Question 16

If a country’s nominal GDP grows by 10% and the GDP deflator increases by 4%, what is the approximate growth rate of real GDP? Use the formula $$ 	ext{Real GDP Growth} \approx 	ext{Nominal GDP Growth} - 	ext{Inflation Rate} .$$

Accepted Answer

6%

Question 17

Which of the following would increase GDP as measured by the expenditure approach?

Accepted Answer

An increase in government spending on infrastructure.

Question 18

If the value added by the farmer is $$0.30, by the miller is 0.35$$, by the baker is $$0.35, and by the grocer is 0.20$$, what is the total value added in the production of a loaf of bread?

Accepted Answer

$1.20

Question 19

Which of the following is a reason why GDP may not accurately reflect the true economic welfare of a nation?

Accepted Answer

GDP does not include non-market transactions such as household labor.

Measuring National Output and Income: GDP and Its Applications

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