Q: Calculate the GDP deflator for 2021 using the following data: Nominal GDP = $$600, Real GDP = 350.$$

$$\frac{600}{350} \times 100 = 171$$

Question 1

Which of the following best describes the relationship between income and expenditure in an economy, according to the circular-flow diagram?

Accepted Answer

For the economy as a whole, income must equal expenditure.

Question 2

Which of the following transactions would be included in the calculation of a country’s GDP?

Accepted Answer

A Canadian household purchases a new car manufactured in Canada.

Question 3

Suppose the price of a hot dog is $$2 and the price of a hamburger is 4. If 30 $$hot dogs are sold, how many hamburgers would contribute the same amount to GDP?

Accepted Answer

15

Question 4

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

Accepted Answer

The value of a used textbook sold between students.

Question 5

A Canadian student moves to Japan to teach English. Her salary is included in:

Accepted Answer

Only Japan’s GDP.

Question 6

If General Motors builds $$500 million worth of cars, but only 470 $$million worth are sold to consumers, how is GDP affected?

Accepted Answer

GDP rises by $500 million.

Question 7

Which of the following is the correct formula for GDP using the expenditure approach?

Accepted Answer

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

Question 8

Which component of GDP is the largest in most developed economies, including Canada?

Accepted Answer

Consumption

Question 9

If all quantities produced in an economy rise by 5% and all prices fall by 5%, what happens to real and nominal GDP?

Accepted Answer

Real GDP rises by 5%, nominal GDP is unchanged.

Question 10

Which of the following best describes the GDP deflator?

Accepted Answer

A measure of the price level calculated as the ratio of nominal GDP to real GDP times 100.

Question 11

Calculate the GDP deflator for 2021 using the following data: Nominal GDP = $$600, Real GDP = 350.$$

Accepted Answer

$$\frac{600}{350} 	imes 100 = 171$$

Question 12

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

Accepted Answer

GDP ignores the distribution of income.

Question 13

If Mr. Keating quits his job as a teacher to homeschool his own children, what happens to GDP?

Accepted Answer

GDP falls because his market income decreases.

Question 14

Which of the following best explains why Switzerland’s GDP is lower than India’s or China’s, even though Switzerland is wealthier per person?

Accepted Answer

Switzerland has a lower population, so its total GDP is lower.

Question 15

Which of the following would cause net exports to decrease in a country’s GDP calculation?

Accepted Answer

An increase in imports with no change in exports.

Question 16

If nominal GDP in year 1 is $$500 and in year 2 is 600$$, and the GDP deflator in year 1 is 100 and in year 2 is 120, what is the inflation rate between year 1 and year 2?

Accepted Answer

$$\frac{120 - 100}{100} 	imes 100 = 20\%$$

Question 17

Which of the following is an example of an intermediate good that would NOT be included in GDP unless added to inventory?

Accepted Answer

A car tire sold to a car manufacturer.

Question 18

Which of the following best describes real GDP?

Accepted Answer

The value of goods and services produced at constant prices.

Question 19

Which of the following is NOT a component of GDP using the expenditure approach?

Accepted Answer

Wages and salaries

Question 20

A Canadian buys a pair of shoes made in Italy. How is this transaction treated in the Canadian national income accounts?

Accepted Answer

Net exports fall, while GDP does not change.

Measuring a Nation’s Income: Gross Domestic Product and Economic Well-Being

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