#1
Which of the following is a component of Gross Domestic Product (GDP)?
Government spending
ExplanationGovernment spending contributes to the total economic output of a country.
#2
Which of the following is an example of transfer payments in the context of national income accounting?
Social Security benefits
ExplanationTransfer payments like Social Security benefits are income redistributed from taxpayers to recipients without any corresponding production.
#3
In national income accounting, what is the difference between Gross National Product (GNP) and Net National Product (NNP)?
NNP includes depreciation, while GNP does not
ExplanationNNP adjusts GNP for depreciation, providing a more accurate measure of a nation's economic output.
#4
What does the term 'Multiplier Effect' refer to in the context of macroeconomics?
The magnification of changes in government spending on the overall economy
ExplanationThe Multiplier Effect describes how an initial change in spending or investment can lead to a larger overall impact on economic activity.
#5
What is the 'Crowding Out Effect' in the context of macroeconomics?
An increase in government spending leading to a decrease in private investment
ExplanationThe Crowding Out Effect occurs when increased government spending reduces private sector investment by competing for available funds.
#6
What is the formula for calculating Gross Domestic Product (GDP)?
GDP = Consumption + Investment + Government Spending + (Exports - Imports)
ExplanationGDP is the sum of all expenditures, including consumption, investment, government spending, and net exports.
#7
Which of the following is not included in the calculation of GDP?
Government transfer payments
ExplanationTransfer payments are not considered part of GDP as they do not reflect current production.
#8
What is the significance of the 'Income Approach' in calculating Gross Domestic Product (GDP)?
It measures the total income earned by factors of production
ExplanationThe Income Approach aggregates all income earned by factors of production to estimate GDP.
#9
In the context of national income accounting, what does the term 'Disposable Income' represent?
Income after taxes and other mandatory deductions
ExplanationDisposable Income is the amount of money available to households after accounting for taxes and mandatory deductions.
#10
Which of the following is an example of an intermediate good in the production process?
Flour used to make bread
ExplanationIntermediate goods are used in the production process and are not sold directly to consumers.
#11
What does the term 'Net National Product (NNP)' represent?
Gross Domestic Product adjusted for depreciation
ExplanationNNP measures the value of a nation's output after accounting for the depreciation of capital goods.
#12
What is the primary purpose of the 'National Income and Product Accounts (NIPA)'?
To measure a country's economic performance and standard of living
ExplanationNIPA provides comprehensive data to assess the economic health and living standards of a nation.
#13
What is the relationship between Gross National Product (GNP) and Gross Domestic Product (GDP)?
They are equal
ExplanationUnder certain conditions, GNP and GDP can be equal, representing the same value of a nation's economic output.
#14
How does the underground economy or informal sector impact official measures of national income like GDP?
It reduces official measures
ExplanationThe underground economy, being unreported and untaxed, reduces the accuracy of official measures like GDP.
#15
How does the Consumer Price Index (CPI) differ from the Producer Price Index (PPI)?
CPI measures changes in the prices of goods and services purchased by consumers, while PPI measures changes in the prices of goods and services at the producer level
ExplanationCPI tracks changes in consumer prices, while PPI monitors changes in producer prices, reflecting different stages of the supply chain.