Question 1

If real GDP is greater than nominal GDP for a particular year, then

Accepted Answer

Real GDP being greater than nominal GDP indicates that the price level in the current year is lower than in the base year, meaning prices must have fallen between the current year and the base year.

Question 2

$\begin{array} { l c c } \hline & \begin{array} { c } \text { Data for 2012 } \ \text { (billions of dollars) } \end{array} & \begin{array} { c } \text { Data for 2013 } \ \text { (billions of dollars) } \end{array} \ \hline \text { Nominal GDP } & 4,000 & 4,400 \ \text { GDP using 2010 prices } & 4,000 & 4,240 \ \text { GDP using 2011 prices } & 4,230 & 4,400 \ \hline \end{array}$ The table above gives some data about GDP in a country for two years. Using these the chained-dollar method for calculating real GDP, real GDP increased by_{--------------------} percent between these two years.

Accepted Answer

The answer of \(\begin{array} { l c c } 
\hline...

Question 3

If the purchase of used goods was to be incorporated into measuring GDP using the expenditure approach, then

Accepted Answer

Including used goods in GDP would result in double counting, as their value was already included when they were first produced and sold.

Question 4

$\begin{array} { l c c c c } 
& { \text { Date for } \mathbf { 2 0 1 2 } } & & { \text { Data for } \mathbf { 2 0 1 3 } } \
\hline  { \text { Item } } & \text { Quantity } & \text { Price } & \text { Quantity } & \text { Price } \
\hline \text { Bananas } & 100 & \$ 2.00 & 125 & \$ 4.00 \
\text { Sunscreen } & 60 & \$ 5.00 & 75 & \$ 4.00 \
\hline
\end{array}$

Bananaland produces only bananas and sunscreen and the quantities and prices for 2012 and 2013 are given in the table above. 
- The base year is 2012. Nominal GDP in 2012 is equal to

Accepted Answer

The answer of \(\begin{array} { l c c c c...

Question 5

Everything else the same, if government expenditure increases by $400 billion and imports increase by $400 billion, then GDP

Accepted Answer

Government expenditure is a component of GDP, so an increase in government spending increases GDP. However, imports are subtracted from GDP, so an increase in imports decreases GDP by the same amount. Therefore, the net effect on GDP is zero.

Question 6

Gross Domestic Product measures the

Accepted Answer

Gross Domestic Product (GDP) measures the market value of all final goods and services produced within a country in a given year.

Question 7

Adding wages, interest, rent, and profits yields

Accepted Answer

The answer of Adding wages, interest, rent, and profits yields
...

Question 8

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

Accepted Answer

Net exports of goods and services are part of the expenditure approach, not the income approach, which includes profits, rent, wages, and interest.

Question 9

Production by Honda, a Japanese firm, in the United States is included in _{-------------}GDP and production by Nike Corporation, a U.S. firm, in Vietnam is included in GDP_{-------------}.

Accepted Answer

Production by Honda in the U.S. is included in U.S. GDP because it occurs within the U.S. borders. Production by Nike in Vietnam is included in Vietnamese GDP because it occurs within Vietnam's borders.

Question 10

The income approach to measuring GDP is based on summing

Accepted Answer

The income approach to GDP sums up all the incomes earned in the economy, which includes wages, interest, rent, and profits.

Question 11

When calculating GDP, purchases of used goods are

Accepted Answer

Purchases of used goods are not included in GDP calculations because GDP measures the value of new production within a given time period, and used goods were already counted in GDP when they were first sold as new.

Question 12

Nominal GDP is GDP

Accepted Answer

Nominal GDP is calculated using current market prices, without adjusting for inflation or deflation.

Question 13

Real GDP is the value of final goods and services produced in a year

Accepted Answer

Real GDP is adjusted for inflation and expressed in the prices of a base year to provide a more accurate reflection of an economy's size and how it's growing over time.

Question 14

The U.S. economy is experiencing falling output, falling employment, falling incomes and rising unemployment. These conditions best describe a business cycle_{--------------------} .

Accepted Answer

A recession is characterized by falling output, employment, and incomes, along with rising unemployment.

Question 15

In a small country, using prices of 2012, GDP in 2012 was $100 and GDP in 2013 was $110. Using prices of 2013, GDP in 2012 was $200 and GDP in 2013 was $210. The country's BEA will calculate _{--------------------}Percent as the growth in real GDP between those years.

Accepted Answer

The answer of In a small country, using prices of...

Question 16

Excluding household and underground production leads to

Accepted Answer

Excluding household and underground production leads to underestimation of both real GDP and nominal GDP because these activities contribute to the economy but are not captured in official GDP statistics.

Question 17

Based on the figure above, in which quarter or quarters did a peak occur?

Accepted Answer

The answer of

Based on the figure above, in which...

Question 18

Net exports of goods and services is equal to the value of

Accepted Answer

Net exports of goods and services is calculated as the value of exports minus the value of imports.

Question 19

Which of the following expenditure components of GDP can be negative or positive?

Accepted Answer

Net exports of goods and services can be negative if a country imports more than it exports, resulting in a trade deficit.

Question 20

When Jamie purchases a classic 1968 Plymouth Cuda convertible from Shane, GDP

Accepted Answer

GDP does not change because the car is a used good and was not produced in the current year. GDP only includes goods and services produced within the current year.

Quiz 5: GDP: a Measure of Total Production and Income