Q: If nominal GDP in 2022 is $$22,000 and real GDP in 2022 (using 2017 as the base year) is 20$$,000, what is the GDP deflator for 2022?

$$\frac{22,000}{20,000} \times 100 = 110$$

Question 1

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

Accepted Answer

The total market value of all final goods and services produced within a country's borders during a period of time, typically one year.

Question 2

Why are only final goods and services included in the calculation of GDP?

Accepted Answer

To avoid double counting the value of intermediate goods and services.

Question 3

Which of the following transactions would be included in the calculation of U.S. GDP for 2023?

Accepted Answer

A U.S. household purchases a new house built in 2023.

Question 4

Which of the following is NOT a component of GDP as measured by the expenditure approach?

Accepted Answer

Transfer payments (T)

Question 5

Suppose the following data for a country in 2022: Consumption = $$10,000, Investment = 3$$,000, Government Purchases = $$2,000, Exports = 1$$,500, Imports = $2,500. What is the GDP for 2022?

Accepted Answer

$$10,000 + 3$$,000 + $$2,000 + (1$$,500 - $$2,500) = 14$$,000 - $$1,000 = 13$$,000

Question 6

Which of the following best explains why GDP is not a perfect measure of economic well-being?

Accepted Answer

GDP does not include the value of leisure, household production, or the distribution of income.

Question 7

If nominal GDP in 2022 is $$22,000 and real GDP in 2022 (using 2017 as the base year) is 20$$,000, what is the GDP deflator for 2022?

Accepted Answer

$$\frac{22,000}{20,000} 	imes 100 = 110$$

Question 8

Which of the following is an example of household production that is NOT included in GDP?

Accepted Answer

A parent cooking dinner for their family.

Question 9

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

Accepted Answer

It facilitates the flow of funds from savers to borrowers, enabling investment.

Question 10

Which of the following would cause GDP to overstate the actual increase in production over time?

Accepted Answer

An increase in the price level with no change in the quantity of goods and services produced.

Question 11

Which of the following is true about the underground economy in developing countries?

Accepted Answer

It often exceeds 50 percent of total output.

Question 12

If real GDP increases by 3% and the GDP deflator increases by 2%, what is the approximate growth rate of nominal GDP?

Accepted Answer

5%

Question 13

Which of the following is subtracted when calculating net exports in the GDP formula?

Accepted Answer

Imports

Question 14

Which of the following is a shortcoming of using GDP per capita as a measure of standard of living?

Accepted Answer

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

Question 15

Which of the following best describes the difference between GDP and Gross National Product (GNP)?

Accepted Answer

GDP measures production within a country's borders, while GNP measures production by a country's citizens, including overseas production.

Question 16

A country’s nominal GDP increased from $$500 billion to 550 $$billion, while its real GDP (in base-year prices) increased from $$500 billion to 520 $$billion. What is the inflation rate as measured by the GDP deflator?

Accepted Answer

$$\frac{550}{520} 	imes 100 = 105.77$$, so inflation rate is $$5.77\%$$

Question 17

Which of the following is included in the calculation of national income but not in GDP?

Accepted Answer

GDP minus depreciation (i.e., national income)

Question 18

If disposable personal income increases, which of the following is most likely to occur, holding all else constant?

Accepted Answer

Household consumption and saving will both increase.

Question 19

During a recession, which of the following typically occurs?

Accepted Answer

Total production and total employment decrease.

Question 20

Which of the following best explains why some economists prefer Gross Domestic Income (GDI) over GDP for identifying recessions?

Accepted Answer

GDI measures income, which may better reflect short-run changes in economic activity.

Measuring Total Production and Income: Gross Domestic Product (GDP) and Beyond

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