Question 1

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

Accepted Answer

The market value of all final goods and services produced within a country in a given time period.

Question 2

Why does GDP only include the value of final goods and services?

Accepted Answer

To avoid double counting, since intermediate goods are already included in the value of final goods.

Question 3

Which equation correctly represents the expenditure approach to calculating GDP?

Accepted Answer

$$GDP = C + I + G + (X - M)$$

Question 4

If a Canadian firm sells $$100$$ million worth of goods to the United States and buys $$80$$ million worth of goods from the United States, what is the value of net exports ($$X - M$$)?

Accepted Answer

$$20$$ million

Question 5

Which of the following is NOT included in the calculation of GDP?

Accepted Answer

The value of household chores performed by family members.

Question 6

What does 'gross' in Gross Domestic Product refer to?

Accepted Answer

It refers to the total value before deducting depreciation.

Question 7

Which of the following best explains why real GDP is preferred over nominal GDP for comparing economic performance over time?

Accepted Answer

Real GDP removes the effects of price changes, allowing for comparison of actual output.

Question 8

Suppose in 2012, real GDP per person was $$20,000$$, and in 2023, it was $$60,000. $$What is the ratio of real GDP per person in 2023 to 2012?

Accepted Answer

$$3$$

Question 9

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

Accepted Answer

It does not account for the value of leisure time.

Question 10

If gross investment in a year is $$500$$ million and depreciation is $$100$$ million, what is net investment?

Accepted Answer

$$400$$ million

Question 11

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

Accepted Answer

A Canadian household purchases a new refrigerator made in Canada.

Question 12

Which of the following best describes potential GDP?

Accepted Answer

The value of real GDP when all resources are fully employed without causing inflation.

Question 13

If real GDP increases by $$5\%$$ from one year to the next, but the population increases by $$5\% as $$well, what happens to real GDP per person?

Accepted Answer

It remains unchanged.

Question 14

Which of the following is an example of underground economic activity that would not be included in GDP?

Accepted Answer

A cash payment to a gardener who does not report the income.

Question 15

Which of the following statements about the business cycle is correct?

Accepted Answer

An expansion is a period during which real GDP rises from a trough to a peak.

Question 16

If the sum of the red flows in the circular flow diagram equals the blue flow, what does this imply?

Accepted Answer

Total expenditure equals total income.

Question 17

Which of the following best explains why GDP measured by the income approach may differ from GDP measured by the expenditure approach?

Accepted Answer

Because indirect taxes less subsidies must be added to convert factor cost to market price.

Question 18

Suppose in 2022, real GDP at 2022 prices was $$280$$ million, and in 2023, real GDP at 2022 prices was $$300$$ million. What is the percentage increase in real GDP?

Accepted Answer

$$7.1\%$$

Question 19

Which of the following is true about chained-dollar real GDP?

Accepted Answer

It uses prices of adjacent years and averages percentage changes to link to the base year.

Monitoring the Value of Production: GDP – Study Notes

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