Question 1

The base year is 2011. A country only produces Blu-ray players. The price of a Blu-ray player in 2011 was $100. The price of a Blu-ray player was $90 in 2012. The quantity of Blu-ray players produced in 2011 was 10,000 units and in 2012 was 10,500 units. Nominal GDP in 2012 equals

Accepted Answer

Nominal GDP can be calculated by multiplying the quantity of output produced by the current year price level. Therefore, Nominal GDP in 2012 can be calculated as: 
Nominal GDP = Quantity of output produced x Price level 
Nominal GDP = 10,500 x $90 
Nominal GDP = $945,000

Question 2

The difference between nominal GDP and real GDP is

Accepted Answer

Nominal GDP is calculated using current market prices, while real GDP is adjusted for inflation. Therefore, the difference between nominal and real GDP is the prices used in their calculations.

Question 3

Expenditures in GDP do not include ________.

Accepted Answer

Expenditures in GDP only include final goods and services produced within a country's borders during a given time period, so used goods and financial assets like stocks and bonds are not included.

Question 4

Nominal GDP can change

Accepted Answer

Nominal GDP can change if either prices or the quantities of goods and services change. If prices increase but the quantities of goods and services produced remain the same, then nominal GDP will increase. If the quantities of goods and services produced increase but prices remain the same, then nominal GDP will also increase. Therefore, it is only if either or both of these factors change that nominal GDP will change.

Question 5

According to the expenditure approach to measuring GDP, in the United States, the largest component of GDP is

Accepted Answer

According to the expenditure approach, GDP is the sum of consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services. In the United States, the largest component of GDP is typically consumption expenditure, which includes spending by households on goods and services.

Question 6

Which of the following is NOT included in the income approach to calculating GDP?

Accepted Answer

Net exports of goods and services are included in the expenditure approach to calculating GDP, not the income approach. The income approach includes profits, interest, wages, rent, and other forms of income earned by individuals and businesses in the economy.

Question 7

Which of the following is NOT part of the income used in the income approach to measuring GDP?

Accepted Answer

Taxes paid by persons are not part of the income used in the income approach to measuring GDP. The income approach measures GDP by adding up all the income earned by factors of production (wages, rent, interest, profit). Taxes are not considered income earned by factors of production.

Question 8

Suppose GDP is $10 billion, consumption expenditure is $7 billion, investment is $2 billion, and government expenditure on goods and services is $2 billion. Net exports of goods and services must be

Accepted Answer

GDP = C + I + G + NX 
$10 billion = $7 billion + $2 billion + $2 billion + NX 
NX = $10 billion - $7 billion - $2 billion - $2 billion 
NX = -$1 billion

Question 9

The sum of the components of incomes is called ________.

Accepted Answer

The answer of The sum of the components of incomes...

Question 10

Data for 2009 Data for 2010
 Item
Bread
Soda 
 $$\begin{array} { c c c c } 
\text { Quantity } & \text { Price } & \text { Quantity } & \text { Price } \
\hline 50 & \$ 4.00 & 70 & \$ 3.00 \
50 & \$ 5.00 & 50 & \$ 6.00 \
\hline
\end{array}$$
-The table above gives the production and prices for a small nation that produces only bread and soda. The base year is 2010. What is real GDP in 2010?

Accepted Answer

The answer of Data for 2009 Data for 2010
 Item
Bread
Soda...

Question 11

Which of the following is NOT included in the expenditure approach to calculating GDP?

Accepted Answer

Wages are not included in the expenditure approach to calculating GDP. The expenditure approach focuses on the aggregate spending by households, businesses, and the government on goods and services. Wages, on the other hand, are considered a factor of production and are included in the income approach to calculating GDP.

Question 12

Data for 2009 Data for 2010
 Item
Bread
Soda 
 $$\begin{array} { c c c c } 
\text { Quantity } & \text { Price } & \text { Quantity } & \text { Price } \
\hline 50 & \$ 4.00 & 70 & \$ 3.00 \
50 & \$ 5.00 & 50 & \$ 6.00 \
\hline
\end{array}$$
-The table above gives the production and prices for a small nation that produces only bread and soda. The base year is 2009. What is nominal GDP in 2009?

Accepted Answer

The answer of Data for 2009 Data for 2010
 Item
Bread
Soda...

Question 13

In calculating GDP, economists

Accepted Answer

In calculating GDP, economists can measure either total expenditure or total income, as both measures should theoretically be equal. The most commonly used method is measuring total expenditure, as it is easier to collect data on. However, measuring total income (i.e. the sum of all incomes earned by households and businesses involved in production) is also a valid method of calculating GDP.

Question 14

The base year is 2010. A country only produces MP3 players. The price of an MP3 player in 2008 was $50. The price of an MP3 player was $30 in 2010. The quantity of MP3 players produced in 2008 was 10,000 units and in 2010 was 20,000 units. Nominal GDP in 2010 equals

Accepted Answer

Nominal GDP in 2008 was 10,000 units x $50 = $500,000. Nominal GDP in 2010 was 20,000 units x $30 = $600,000. As we are asked to find the nominal GDP only for the year 2010, the answer is $600,000.

Question 15

A south sea island produces only coconuts. In 2012, the price of a coconut is $1 and the quantity produced is 200. In 2013, the price of a coconut is $1.50 and the quantity produced is 250. 2012 is the base year. Real GDP in 2013 is ________.

Accepted Answer

The answer of A south sea island produces only coconuts....

Question 16

The expenditure approach to measuring GDP is based on summing

Accepted Answer

The expenditure approach to measuring GDP involves summing the four components of GDP, which are consumption expenditure, investment, government expenditure on goods and services, and net exports of goods and services. This approach does not include wages, interest, rent, and profit as individual components.

Question 17

When calculating real GDP, the reference base year

Accepted Answer

The reference base year allows us to calculate the value of goods and services in terms of prices of that base year. This is important because prices change over time and using a single reference year allows for more accurate comparisons of GDP over time. It does not impact the comparison of GDP to GNP. It also does not necessarily increase or decrease the value of GDP or GNP, only adjusts for changes in prices.

Question 18

GDP is

Accepted Answer

GDP may not necessarily reflect the actual standard of living of the population since it is only a measure of the total value of goods and services produced within a country's borders. It does not take into account factors such as income inequality, environmental degradation, and quality of life. Therefore, it is an imperfect measure of the standard of living.

Question 19

The base year is 2012. A country only produces Blu-ray players. The price of a Blu-ray player in 2012 was $100. The price of a Blu-ray player was $90 in 2013. The quantity of Blu-ray players produced in 2012 was 10,000 units and in 2013 was 10,500 units. Real GDP in 2012 equals

Accepted Answer

Real GDP in the base year is calculated by multiplying the quantity of goods produced in the base year by the price of those goods in the base year. So, Real GDP in 2012 = 10,000 units x $100 per unit = $1,000,000.

Question 20

During last year, a country produced 20,000 pizzas and 10,000 hamburgers and nothing else. The pizzas sold for $10.00 each and the hamburgers for $3.00 each. Nominal GDP was

Accepted Answer

The answer of During last year, a country produced 20,000...

Quiz 14: Gdp: a Measure of Total Production and Income