Q: Suppose in 2022, the nominal GDP of a country is $$2,000 billion and the real GDP (base year 2012) is 1$$,600 billion. What is the GDP deflator for 2022?

$$\frac{2000}{1600} \times 100 = 125$$

Q: If real GDP in 2017 was $$17,995.15 billion and in 2018 it was 18$$,511.76 billion, what was the real GDP growth rate from 2017 to 2018?

$$\frac{18,511.76 - 17,995.15}{17,995.15} \times 100 = 2.87\%$$

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 in a given period.

Question 2

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

Accepted Answer

A new car produced by Toyota in Kentucky and sold in 2023.

Question 3

Why are intermediate goods excluded from GDP calculations?

Accepted Answer

To avoid double-counting, since their value is already included in the value of final goods.

Question 4

Suppose in 2022, the nominal GDP of a country is $$2,000 billion and the real GDP (base year 2012) is 1$$,600 billion. What is the GDP deflator for 2022?

Accepted Answer

$$\frac{2000}{1600} 	imes 100 = 125$$

Question 5

Which of the following is NOT included in the 'Investment' (I) component of GDP?

Accepted Answer

Purchases of stocks and bonds by households.

Question 6

If the value of U.S. exports is $$500 billion and the value of U.S. imports is 600 $$billion in a given year, what is the value of net exports (NX) for the U.S.?

Accepted Answer

$$500 - 600$$ = -$$100$$ billion

Question 7

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

Accepted Answer

GDP does not account for the value of leisure time.

Question 8

A U.S. company produces furniture in Florida and sells it in Canada. How is this production counted in national accounting?

Accepted Answer

It is included in U.S. GDP and U.S. exports.

Question 9

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

Accepted Answer

Nominal GDP is measured in current-year prices, while real GDP is measured in base-year prices.

Question 10

If real GDP in 2017 was $$17,995.15 billion and in 2018 it was 18$$,511.76 billion, what was the real GDP growth rate from 2017 to 2018?

Accepted Answer

$$\frac{18,511.76 - 17,995.15}{17,995.15} 	imes 100 = 2.87\%$$

Question 11

Which of the following is an example of a government transfer payment that is NOT included in GDP?

Accepted Answer

Social Security payments to retirees.

Question 12

Which of the following would cause nominal GDP to increase but not real GDP?

Accepted Answer

An increase in the price level with no change in output.

Question 13

Which of the following is included in the calculation of GDP using the expenditure approach?

Accepted Answer

Spending by households on new cars.

Question 14

If the GDP deflator in 2020 is 110 and in 2021 is 121, what is the inflation rate between 2020 and 2021 as measured by the GDP deflator?

Accepted Answer

$$\frac{121 - 110}{110} 	imes 100 = 10\%$$

Question 15

Which of the following is a reason why GDP per capita is an imperfect measure of living standards?

Accepted Answer

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

Question 16

A U.S. citizen earns profits from a factory she owns in Brazil. How is this income counted in national accounting?

Accepted Answer

It is included in U.S. GNP but not in U.S. GDP.

Question 17

Which of the following best describes the circular flow model in macroeconomics?

Accepted Answer

It shows the flow of money, goods, and services between households and firms.

Question 18

If a country’s nominal GDP increases by 10% from one year to the next, but the GDP deflator also increases by 10%, what happens to real GDP?

Accepted Answer

Real GDP remains unchanged.

Question 19

Which of the following is an example of a shortcoming of GDP as a measure of total production?

Accepted Answer

It does not include the value of household production such as childcare and cooking.

Question 20

Suppose the BEA reports a quarterly real GDP growth rate of 1.5%. What is the annualized growth rate, assuming the same rate continues for all four quarters?

Accepted Answer

$$(1.015)^4 - 1 = 0.0614 = 6.14$$\%$$

GDP: Measuring Total Production and Total Income – Core Concepts in Macroeconomics

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