#1
Which of the following is included in the calculation of Gross Domestic Product (GDP)?
All of the above
ExplanationGDP encompasses consumption, investment, government spending, and net exports.
#2
How does the expenditure approach calculate Gross Domestic Product (GDP)?
By summing up consumption, investment, government spending, and net exports
ExplanationExpenditure approach to GDP calculation adds up various components.
#3
What is the primary function of the net exports component in the GDP equation?
To account for the difference between exports and imports
ExplanationNet exports reflect trade balance by considering the difference between exports and imports.
#4
Which of the following is an example of an intermediate good in the calculation of GDP?
Wheat used to make flour
ExplanationIntermediate goods like wheat, used in further production, are not counted in GDP.
#5
What does the term 'circular flow of income' represent in the context of GDP?
The continuous movement of money and resources between households, businesses, and the government
ExplanationCircular flow of income illustrates the exchange of resources and money among different sectors of the economy.
#6
What is the formula for calculating Gross Domestic Product (GDP)?
GDP = Consumption + Investment + Government Spending + (Exports - Imports)
ExplanationGDP calculation sums up various components including consumption, investment, government spending, and net exports.
#7
Which component of GDP represents the value of goods and services produced by a country's residents regardless of the location?
Gross National Product (GNP)
ExplanationGNP accounts for production by residents irrespective of location.
#8
Which of the following is considered an investment in the context of GDP calculation?
Buying a new home
ExplanationInvestment includes purchases of capital assets like homes.
#9
What is the primary limitation of using GDP as a measure of a country's economic well-being?
It doesn't account for income inequality
ExplanationGDP doesn't reflect distribution of income.
#10
How does an increase in government spending affect GDP in the short run?
Increases GDP
ExplanationGovernment spending boosts GDP, especially in the short term.
#11
Which of the following is an example of a final good in the calculation of GDP?
A finished automobile
ExplanationFinal goods like automobiles are counted in GDP.
#12
If a country's GDP is growing, but its population is growing faster, what is likely happening to the standard of living?
Declining
ExplanationDespite GDP growth, if population growth exceeds, standard of living likely decreases.
#13
Which of the following is an example of government transfer payments excluded from GDP calculations?
All of the above are included in GDP
ExplanationGovernment transfer payments are included in GDP calculations.
#14
In the income approach to calculating GDP, which of the following is subtracted from gross domestic income to obtain net domestic income?
Depreciation
ExplanationDepreciation is deducted to obtain net domestic income.
#15
What is the key difference between nominal GDP and real GDP?
Nominal GDP includes inflation, while real GDP adjusts for inflation
ExplanationReal GDP accounts for inflation, while nominal GDP doesn't.
#16
What does the GDP deflator measure?
The overall level of prices in the economy
ExplanationGDP deflator gauges the general price level in the economy.
#17
If a country experiences a decrease in investment and an increase in government spending, what is likely to happen to its GDP?
GDP increases
ExplanationDespite decreased investment, increased government spending could lift GDP.