Q: Which formula correctly calculates real GDP?

$\text{Real GDP} = \frac{\text{Nominal GDP}}{\text{GDP Deflator}} \times 100$

Question 1

Which of the following is considered a final good in the calculation of GDP?

Accepted Answer

Gasoline you put in your car

Question 2

Which of the following is an intermediate good?

Accepted Answer

A homebuilder buying lumber from a sawmill to build a patio in her backyard

Question 3

Adding up the market value of all final and intermediate goods and services produced in a country in a given year would most likely:

Accepted Answer

Overstate the GDP for that year

Question 4

When measuring GDP using the expenditure approach, which of the following would NOT be included?

Accepted Answer

A purchase of a mutual fund

Question 5

When using the expenditure approach to calculate GDP, which of the following would be included?

Accepted Answer

The government buying $3 million worth of computers for schools

Question 6

The country of Spartania experiences the following economic activity in 2022: Tom’s Salsa Sauce Company crushes the tomatoes into tomato sauce and sells the sauce for $3 million to the residents of Spartania. This is the only economic activity that occurs in Spartania this year. What is the GDP of Spartania?

Accepted Answer

$3 million

Question 7

The country of Angola exports $3 million worth of shoes to Belgium. Belgium exports $2 million worth of Arctic rugs to Canada. Canada exports $4 million in aluminum equipment to Angola. The only information available is that shoes among these countries are Angolan. When calculating the GDP of Angola, what is its Net Exports?

Accepted Answer

$3 million

Question 8

In 2022, the country of Spartania produced 10 baseballs and 6 tulips. That year, baseballs each sold for $3 and tulips each sold for $7 each. In 2023, Spartania produced 10 baseballs at $4 each and the price of tulips increased to $10 each. If amounts of goods remain the same, what is the real GDP of Spartania in 2023 using 2022 prices?

Accepted Answer

$82

Question 9

The country of Spartania has a population of 100 people and produces one good: toyboats. In 2021, each toyboat cost $10 and the country produced 200 of them. In 2022, Spartania produced 150 toyboats and the price increased to $20. If the base year is 2021, what is the real GDP for Spartania in 2022?

Accepted Answer

$1,500

Question 10

Which of the following should NOT be included in the 2022 GDP of the United States?

Accepted Answer

A sports jersey made in China and sold online

Question 11

Suppose the nominal GDP of a country in 2022 is $500 billion and the GDP deflator is 125. What is the real GDP for 2022?

Accepted Answer

$400 billion

Question 12

If the GDP deflator increases from 110 to 120 between 2021 and 2022, what does this indicate?

Accepted Answer

The overall price level increased by approximately 9.1%

Question 13

Which of the following transactions would be counted in the calculation of GDP?

Accepted Answer

A new house built and sold in the current year

Question 14

If a country’s GDP per capita increases, which of the following is most likely true?

Accepted Answer

The country’s standard of living has likely improved

Question 15

Which of the following best describes the difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP is measured using current prices, while real GDP is measured using constant base-year prices

Question 16

Suppose a country’s GDP increases due to a rise in exports. Which component of the expenditure approach is directly affected?

Accepted Answer

Net exports $(NX)$

Question 17

If a bakery buys flour for $500 and sells bread for $1,500, what is the value added by the bakery?

Accepted Answer

$1,000

Question 18

Which formula correctly calculates real GDP?

Accepted Answer

$	ext{Real GDP} = \frac{	ext{Nominal GDP}}{	ext{GDP Deflator}} 	imes 100$

Question 19

Which of the following is an example of double counting in GDP measurement?

Accepted Answer

Including both the value of flour and the value of bread produced from that flour

Question 20

If a country’s GDP is $1 trillion, its population is 50 million, what is its GDP per capita?

Accepted Answer

$20,000

Measuring Output with GDP: Key Concepts and Applications

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