#1
Which component of GDP represents the total value of goods and services produced by domestic factors of production in a country?
Gross Domestic Product (GDP)
ExplanationGDP measures the overall value of goods and services produced within a country's borders.
#2
Which economic indicator is often used to assess the overall health of the labor market?
Unemployment Rate
ExplanationThe unemployment rate gauges the percentage of the labor force without employment.
#3
Which component of GDP includes the value of all goods and services consumed by households?
Consumption
ExplanationConsumption represents the total spending by households on goods and services.
#4
What is the relationship between inflation and purchasing power?
Inflation decreases purchasing power.
ExplanationAs prices rise (inflation), the purchasing power of currency diminishes.
#5
What is the purpose of the Consumer Price Index (CPI) in macroeconomic analysis?
To measure changes in the cost of living over time.
ExplanationCPI serves as an indicator of changes in the overall cost of living, reflecting inflation or deflation.
#6
Which of the following is considered a lagging indicator in macroeconomics?
Gross Domestic Product (GDP)
ExplanationLagging indicators, like GDP, reflect economic performance after changes have occurred.
#7
In the expenditure approach to calculating GDP, what does 'I' stand for?
Investment
ExplanationIn GDP calculation, 'I' represents the total investment made in the economy.
#8
Which of the following is a leading economic indicator often used to predict future economic activity?
Stock Prices
ExplanationStock prices are considered leading indicators, reflecting anticipated economic trends.
#9
What does the term 'Ceteris Paribus' mean in the context of macroeconomic analysis?
All other things being equal or held constant.
ExplanationCeteris Paribus assumes all factors remain constant, isolating the effect of the specific variable under consideration.
#10
What is the formula for calculating the unemployment rate?
(Number of unemployed / Labor force) * 100
ExplanationThe unemployment rate is calculated as the percentage of unemployed individuals in the labor force.
#11
What is the formula for calculating GDP using the production approach?
GDP = Compensation of Employees + Gross Profits + Taxes on Production and Imports - Subsidies
ExplanationThe production approach sums up various components to determine the total value of goods and services produced.
#12
What does the term 'real GDP' account for that 'nominal GDP' does not?
Inflation
ExplanationReal GDP adjusts for inflation, providing a more accurate measure of economic output.
#13
What is the primary difference between GDP and GNP (Gross National Product)?
GDP includes both domestic and foreign production, while GNP includes only domestic production.
ExplanationGDP accounts for all production within borders, while GNP includes domestic production regardless of location.
#14
What is the primary function of the Federal Reserve in the United States?
Monetary Policy
ExplanationThe Federal Reserve influences the economy through monetary policy, managing money supply and interest rates.
#15
In the income approach to calculating GDP, what does 'Y' represent?
National Income
ExplanationIn the income approach, 'Y' signifies the total national income generated by factors of production.