Question 1

Of the following,which is correct?

Accepted Answer

Nominal GDP is a measure of the monetary value of all goods and services produced in a country without adjusting for inflation. Therefore, nominal GDP increases when the prices of goods and services increase, even if there is no change in production. Real GDP, on the other hand, adjusts for inflation and measures changes in production.

Question 2

$$\begin{array} { | l | c | } 
\hline  { \text { Component } } & \begin{array} { c } 
\text { Amount } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline \text { Gross investment } & 1300 \
\hline \begin{array} { l } 
\text { Personal consumption } \
\text { expenditure }
\end{array} & 1475 \
\hline \text { Depreciation } & 25 \
\hline \begin{array} { l } 
\text { Government expenditure on } \
\text { goods and services }
\end{array} & 1315 \
\hline \text { U.S. imports } & 260 \
\hline \text { U.S. exports } & 249 \
\hline \text { Compensation of employees } & 65 \
\hline
\end{array}$$
-Nominal GDP is

Accepted Answer

Nominal GDP is the GDP valued at prices of that year, without adjusting for inflation or price changes. Therefore, option B is the correct choice. Choice A describes real GDP, choice C describes GDP adjusted for inflation, and choice D describes real GDP valued at base year prices.

Question 3

According to the BEA,in the second quarter of 2011 nominal GDP was $15 trillion and in the second quarter of 2012 nominal GDP was $15.6 trillion.Based solely on this information,from the second quarter of 2011 to the second quarter of 2012

Accepted Answer

Nominal GDP reflects changes in both prices and quantity of goods and services produced. Therefore, we cannot determine whether real GDP, which only reflects changes in the quantity of goods and services produced, increased, decreased, or stayed the same.

Question 4

Which of the following is TRUE regarding real GDP?
I. Real GDP is the value of the total production of the country's farms,factories,shops,and offices.
II. Real GDP rises whenever inflation occurs.
III. Real GDP does not measure all that is produced.

Accepted Answer

I is true as real GDP is the value of the total production of a country, including goods and services produced by farms, factories, shops, and offices.
II is false as real GDP is adjusted for inflation to give a more accurate measure of the country's economic output.
III is true as real GDP does not include non-market economic activity, such as household production or the underground economy.

Question 5

Which of the following is not a component of the incomes approach to GDP?

Accepted Answer

The incomes approach to GDP includes wages and salaries, corporate profits, and proprietors' income, but not net exports. Net exports are included in the expenditure approach to GDP.

Question 6

Potential GDP is

Accepted Answer

Potential GDP is the maximum amount of GDP that an economy can produce while maintaining price stability, and avoiding the shortages of labor, capital, land, and entrepreneurship that would cause inflation to rise. It is not a goal that cannot be achieved, but rather an ideal level of economic output that can be reached with optimal utilization of resources.

Question 7

Real GDP is

Accepted Answer

Real GDP represents the value of total production of all the nation's farms, factories, shops and offices, but it is measured in the prices of a single year, which is used as a reference year. This allows for comparisons over time without the influence of changes in prices. Option A refers to inflation, not real GDP. Option B suggests a specific relationship between GDP and unemployment, which is not necessarily true. Option D describes nominal GDP, which is GDP measured at current prices without adjusting for inflation.

Question 8

Potential GDP

Accepted Answer

Potential GDP measures the maximum amount of production that can be produced while avoiding shortages of labor, capital, land, and entrepreneurship that would bring rising inflation. It does not measure actual production from year to year, which is measured by real GDP. Potential GDP is also not cyclical, as it represents an ideal level of production that can be sustained in the long run.

Question 9

$$\begin{array} { | l | c | } 
\hline  { \text { Component } } & \begin{array} { c } 
\text { Amount } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline \text { Gross investment } & 1300 \
\hline \begin{array} { l } 
\text { Personal consumption } \
\text { expenditure }
\end{array} & 1475 \
\hline \text { Depreciation } & 25 \
\hline \begin{array} { l } 
\text { Government expenditure on } \
\text { goods and services }
\end{array} & 1315 \
\hline \text { U.S. imports } & 260 \
\hline \text { U.S. exports } & 249 \
\hline \text { Compensation of employees } & 65 \
\hline
\end{array}$$
-Normally in the United States the relationship between nominal and real GDP for a given year is

Accepted Answer

Nominal GDP represents the current market value of goods and services produced in a year using current prices, while real GDP represents the value of goods and services produced in a year but adjusted for inflation. If nominal GDP is greater than real GDP, it indicates that there has been an increase in prices (inflation) during that year. Based on the given information, it can be inferred that nominal GDP would be greater than real GDP because the values provided are in current (nominal) dollars and there is no information given about inflation or adjustment for inflation. Therefore, the correct answer is B.

Question 10

Real Gross Domestic Product is

Accepted Answer

Real Gross Domestic Product (GDP) measures the value of all goods and services produced within a country's borders, adjusted for inflation. It uses the prices of a base year to eliminate the effects of price changes over time, allowing for comparison of economic output across different years.

Question 11

Gross private domestic investment is a component of which approach to measuring GDP?

Accepted Answer

Gross private domestic investment is a component of the expenditure approach, which measures GDP by totaling all spending within an economy, including consumption, investment, government spending, and net exports.

Question 12

Suppose an economy has some inflation.Then,after a base year,the value of real GDP will

Accepted Answer

The answer of Suppose an economy has some inflation.Then,after a...

Question 13

According to the BEA,in the second quarter of 2012 nominal GDP rose by 3.3 percent and real GDP rose by 1.7 percent.The difference between the change in nominal GDP and the change in real GDP could be explained by

Accepted Answer

The difference between the change in nominal GDP and the change in real GDP is due to changes in prices of final goods and services produced. Nominal GDP is calculated using current market prices, while real GDP is adjusted for inflation using a base year price level. Therefore, if nominal GDP increases more than real GDP, it means that prices of goods and services have increased during the period.

Question 14

The maximum amount of production that can be produced while avoiding shortages of labor,capital,land,and entrepreneurship that would bring rising inflation is called

Accepted Answer

Potential GDP represents the maximum level of output that an economy can produce by utilizing all its resources, without causing inflation or other supply-side constraints. It can be considered as the ceiling of an economy's production capacity.

Question 15

Real GDP measures the

Accepted Answer

Real GDP is a measure of total production, adjusted for changes in the price level (inflation), and is often linked to a base year's prices. Therefore, it represents the value of total production linked to prices of a single year.

Question 16

________ gross domestic product is the value of ________ linked back to the prices of a single year.

Accepted Answer

Real GDP adjusts for changes in prices over time by using a fixed base year. This allows for a more accurate representation of changes in actual production levels. Nominal GDP, on the other hand, does not account for inflation or changes in prices and is simply the current value of total production.

Question 17

Potential GDP is the

Accepted Answer

Potential GDP represents the maximum amount of output that can be produced with the existing resources in the economy, without causing inflation to rise. This includes the optimal utilization of labor, capital, land, and entrepreneurship.

Question 18

$$\begin{array} { | l | c | } 
\hline  { \text { Component } } & \begin{array} { c } 
\text { Amount } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline \text { Gross investment } & 1300 \
\hline \begin{array} { l } 
\text { Personal consumption } \
\text { expenditure }
\end{array} & 1475 \
\hline \text { Depreciation } & 25 \
\hline \begin{array} { l } 
\text { Government expenditure on } \
\text { goods and services }
\end{array} & 1315 \
\hline \text { U.S. imports } & 260 \
\hline \text { U.S. exports } & 249 \
\hline \text { Compensation of employees } & 65 \
\hline
\end{array}$$
-Nominal GDP is the value of final goods and services

Accepted Answer

Nominal GDP is calculated using the current market prices of goods and services in the year they are produced, without adjusting for inflation.

Question 19

Potential GDP is

Accepted Answer

Potential GDP refers to the maximum amount of GDP that can be produced without causing inflationary pressure by fully utilizing all resources, including labor, capital, land, and entrepreneurship. It is not the same as real GDP, which reflects the value of goods and services produced at current market prices. Moreover, changes in potential GDP may result from factors that affect the size and quality of the labor force, innovation and technology, capital accumulation, and the efficient use of resources.

Question 20

In years with inflation,nominal GDP increases ________ real GDP.

Accepted Answer

Nominal GDP includes the effects of inflation, so it will always be higher than real GDP in years with inflation. Real GDP is adjusted for inflation, so it reflects changes in actual production rather than changes in prices. Therefore, nominal GDP will increase faster than real GDP in years with inflation.

Quiz 4: Measuring GDP and Economic Growth

Of the following,which is correct?

According to the BEA,in the second quarter of 2011 nominal GDP was $15 trillion and in the second quarter of 2012 nominal GDP was $15.6 trillion.Based solely on this information,from the second quarter of 2011 to the second quarter of 2012

Which of the following is TRUE regarding real GDP? I. Real GDP is the value of the total production of the country's farms,factories,shops,and offices. II. Real GDP rises whenever inflation occurs. III. Real GDP does not measure all that is produced.

Which of the following is not a component of the incomes approach to GDP?

Potential GDP is

Real GDP is

Potential GDP

Real Gross Domestic Product is

Gross private domestic investment is a component of which approach to measuring GDP?

Suppose an economy has some inflation.Then,after a base year,the value of real GDP will

According to the BEA,in the second quarter of 2012 nominal GDP rose by 3.3 percent and real GDP rose by 1.7 percent.The difference between the change in nominal GDP and the change in real GDP could be explained by

The maximum amount of production that can be produced while avoiding shortages of labor,capital,land,and entrepreneurship that would bring rising inflation is called

Real GDP measures the

gross domestic product is the value of linked back to the prices of a single year.

Potential GDP is the

Potential GDP is

In years with inflation,nominal GDP increases ________ real GDP.