Q: Suppose nominal GDP in 2025 is $$8,000 billion and real GDP in 2025 (using 2017 prices) is 7$$,800 billion. What is the GDP deflator for 2025?

$$GDP\ Deflator = \frac{8,000}{7,800} \times 100 = 102.56$$

Question 1

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

Accepted Answer

The market value of all final goods and services produced within a country's borders during a specific period of time.

Question 2

Which of the following transactions would NOT be included in the calculation of GDP?

Accepted Answer

A bakery buys flour to make bread.

Question 3

Suppose the GDP deflator increased from 110 to 118 between 2024 and 2025. What does this change indicate?

Accepted Answer

The overall price level increased by approximately 7.3%.

Question 4

Which formula correctly expresses the relationship between GDP and its components?

Accepted Answer

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

Question 5

A U.S. company produces shoes in Vietnam and sells them in the United States. How is this production counted in GDP?

Accepted Answer

It is included in Vietnam's GDP because the production occurs there.

Question 6

Which of the following is considered an investment in the calculation of GDP?

Accepted Answer

A business buys new delivery trucks for its operations.

Question 7

Why are intermediate goods excluded from GDP calculations?

Accepted Answer

Including them would result in double counting.

Question 8

If a country’s GDP per capita increases, which of the following must be true?

Accepted Answer

Total GDP has increased faster than population.

Question 9

Which of the following is a limitation of GDP as a measure of well-being?

Accepted Answer

GDP does not account for the value of leisure.

Question 10

Suppose nominal GDP in 2025 is $$8,000 billion and real GDP in 2025 (using 2017 prices) is 7$$,800 billion. What is the GDP deflator for 2025?

Accepted Answer

$$GDP\ Deflator = \frac{8,000}{7,800} 	imes 100 = 102.56$$

Question 11

Which of the following would be counted as government purchases in GDP?

Accepted Answer

The state of Tennessee builds a new highway.

Question 12

If a company purchases cardboard boxes to ship its products, how is this transaction treated in GDP calculations?

Accepted Answer

It is not counted directly, as it is an intermediate good.

Question 13

Which of the following best explains why GDP may overstate economic well-being during wartime?

Accepted Answer

GDP rises due to increased production of military goods, which may not improve civilian well-being.

Question 14

Which of the following is an example of household production that is omitted from GDP?

Accepted Answer

A parent cooks dinner for their family.

Question 15

If the underground economy is large in a developing country, what is a likely consequence for GDP measurement?

Accepted Answer

GDP will underestimate the true level of economic activity.

Question 16

Which of the following is a reason why GDP growth may exaggerate increases in total production over long periods?

Accepted Answer

Household production is increasingly replaced by paid services.

Question 17

Which of the following best describes the value-added approach to measuring GDP?

Accepted Answer

Adding up the value a firm adds to a product at each stage of production.

Question 18

If a business purchases new computer software from IBM, which GDP component is affected?

Accepted Answer

Investment

Question 19

Which of the following would be included in net exports (NX) in the GDP equation?

Accepted Answer

A U.S. company ships goods from New York to Tokyo.

Question 20

Suppose real GDP in 2025 (using 2017 prices) is $$7,800 billion, and real GDP in 2017 is 5$$,540 billion. What is the percentage growth in real GDP from 2017 to 2025?

Accepted Answer

$$\frac{7,800 - 5,540}{5,540} 	imes 100 = 40.8\%$$

Measuring Total Production and Income: Principles of Macroeconomics (ECON 1104)

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