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What does GDP stand for?
Gross Domestic Product
General Domestic Production
Gross Domestic Profit
Government Departmental Purchases
GDP stands for Gross Domestic Product, which measures the total market value of all final goods and services produced within a country's borders in a given period. It is a primary indicator of economic performance and growth. For more details, see IMF: GDP Basics.
Which of the following is NOT a component of GDP using the expenditure approach?
Consumption
Government Spending
Transfer Payments
Investment
Transfer payments like social security or unemployment benefits are payments without the exchange of goods or services and thus are not counted in GDP. They are redistributions of income rather than purchases of output. For more, see BEA: What to Include in GDP.
How is nominal GDP different from real GDP?
Nominal GDP is adjusted for inflation, real GDP is not
Nominal GDP uses chain weighting, real GDP uses fixed weights
Real GDP is adjusted for inflation, nominal GDP is not
Real GDP excludes government spending
Real GDP adjusts nominal GDP for changes in the price level using a base-year price, reflecting true volume changes. Nominal GDP measures output at current prices without controlling for inflation. Visit Investopedia: Real GDP for more.
Which of the following best describes the expenditure approach to GDP?
Surveying household spending only
Valuing goods at replacement cost
Summing consumption, investment, government spending, and net exports
Adding up incomes of all producers
The expenditure approach sums consumption, investment, government spending, and net exports (exports minus imports) to calculate GDP. It reflects total spending on a nation's final goods and services. More information at OECD: Expenditure Approach.
Consumer spending in GDP refers to:
Exports minus imports
Government purchases of goods
Business investment in capital goods
Household purchases of durable and non-durable goods and services
Consumer spending, or personal consumption expenditures, covers goods and services purchased by households, including durable items like cars and nondurables like food. It is typically the largest component of GDP in many economies. See BEA: Consumer Spending Data.
If net exports are negative, what does that indicate?
Imports exceed exports
Exports exceed imports
Trade is balanced
No trade activity
Net exports equal exports minus imports. Negative net exports indicate that a country imports more than it exports, contributing negatively to GDP. For further reading, visit IMF: Trade Balance.
Which of these is counted as investment in GDP terms?
Government transfer payments
Business spending on new machinery
Purchasing stocks and bonds
Household rental payments
In GDP accounting, investment includes business expenditures on capital goods like machinery, equipment, and new construction. It does not include financial investments like stocks. More details at ECB: GDP Investment Guide.
Which of the following would increase a country's GDP?
Household savings deposits
Imports of consumer goods
An increase in national defense spending
A rise in social security payments
National defense spending is a form of government expenditure, which directly adds to GDP under the expenditure approach. Transfers like social security are excluded because they are not purchases of new output. See BEA: What to Include in GDP.
Which component of GDP captures changes in unsold inventory?
Government spending
Investment
Consumption
Net exports
Inventory changes are included in the investment component of GDP; if firms increase inventories, it counts as positive investment. This reflects production that has not yet been sold. For more, see Investopedia: Inventory Investment.
Which of the following best describes 'real GDP per capita'?
Nominal GDP per person
Total GDP divided by number of unemployed
GDP adjusted for inflation per person
GDP growth rate
Real GDP per capita divides real GDP by the population, measuring average economic output per person adjusted for inflation. It's a common gauge of living standards. Learn more at World Bank: GDP per Capita.
Which agency publishes the official GDP figures for the United States?
Bureau of Economic Analysis (BEA)
Department of Commerce
U.S. Census Bureau
Federal Reserve Board
The Bureau of Economic Analysis (BEA), part of the U.S. Department of Commerce, is responsible for compiling and publishing U.S. GDP data. Their reports are released quarterly. See BEA Official Site.
Which of the following statements about GDP is correct?
GDP measures the value of final goods and services
GDP includes intermediate goods to avoid double counting
GDP decreases with increases in exports
GDP only measures the informal economy
GDP measures only the market value of final goods and services produced to prevent double counting of intermediate goods. It excludes intermediate transactions. More at Investopedia: GDP Definition.
Which of the following would NOT be counted in a country's GDP?
A haircut at a salon
A government-funded road construction
A new car purchased by a household
The value of unpaid household work
Unpaid household work, like cooking or cleaning for one's own family, is not traded in markets and thus not included in GDP. GDP only counts paid market transactions. See OECD: Non-Market Accounts.
What is the GDP deflator used to measure?
Inflation by comparing nominal and real GDP
Changes in consumer tastes
Government budget deficits
Level of unemployment
The GDP deflator is the ratio of nominal GDP to real GDP multiplied by 100. It measures the overall price level changes for all domestically produced goods and services. For more, see IMF: GDP Deflator.
Which limitation of GDP relates to welfare and non-market activities?
It covers only services
It excludes government spending
It double counts intermediate goods
It ignores income distribution and unpaid work
GDP does not account for income distribution, leisure, volunteer work, or household labor - factors relevant to welfare. As a result, it can misrepresent social well-being. Read more at OECD: GDP Limitations.
How does Gross National Product (GNP) differ from GDP?
GNP is adjusted for inflation, GDP is not
GNP values only government spending
GNP excludes net exports
GNP measures production by residents domestically and abroad
GNP adds income earned by residents abroad and subtracts income earned by foreigners domestically. GDP measures output within national borders regardless of ownership. For further details, see Investopedia: GNP vs GDP.
What does Purchasing Power Parity (PPP) adjust for when comparing GDP across countries?
Differences in taxation
Differences in price levels
Export volumes
Population size
PPP adjusts GDP comparisons to account for different price levels across countries, reflecting the relative purchasing power of currencies. It gives a more accurate measure of living standards. See World Bank: PPP.
What is 'seasonally adjusted' GDP data?
Data corrected for inflation
Data that removes effects of recurring seasonal patterns
Data reported only annually
Data excluding government spending
Seasonal adjustment removes predictable seasonal fluctuations (like holidays or weather) to reveal underlying trends. It allows better month-to-month or quarter-to-quarter comparisons. More at US Census: Seasonal Adjustment.
Which phase of the business cycle immediately follows a peak?
Expansion
Trough
Recession
Recovery
After an economic peak, activity typically declines, marking the start of a recession. GDP growth turns negative until a trough is reached. For definitions, see Investopedia: Business Cycle.
According to Okun's Law, a 1% increase in unemployment is associated with approximately how much GDP loss?
No change
2 - 3% loss
5% gain
0.5% loss
Okun's Law suggests that for every 1% rise in the unemployment rate, a country's GDP falls roughly 2 - 3% relative to potential output. It quantifies the link between labor market slack and output. More at Brookings: Okun's Law.
What is the output gap?
Difference between public and private investment
Gap in trade balance
Difference between nominal and real GDP
Difference between actual and potential GDP
The output gap measures the deviation of actual GDP from potential GDP, indicating underused resources when negative and overheating when positive. It helps policymakers gauge slack in the economy. See ECB: Output Gap Explainer.
Which measure would best adjust GDP for changes in population size?
GDP deflator
Gross National Income
GDP per capita
Nominal GDP
GDP per capita divides total GDP by the population, controlling for population changes and allowing comparisons of average living standards. It is widely used in cross-country analyses. More at World Bank: GDP per Capita.
Which of the following is a drawback of comparing countries by nominal GDP?
Ignores exchange rate differences
Does not account for cost-of-living differences
Adjusts for inflation too much
Overstates smaller economies
Nominal GDP expressed in a common currency may mislead due to different price levels; it does not adjust for cost-of-living differences across countries. PPP is used to address this issue. For more, see IMF: PPP Explained.
Which index uses fixed-weight prices from a base year to compute real GDP?
Paasche index
GDP deflator
Fisher ideal index
Laspeyres index
The Laspeyres index uses base-year prices to weight current quantities for calculating real GDP. It tends to overstate inflation because it doesn't account for substitution. Learn more at BLS: Price Indexes.
In the Solow growth model, what role does technological progress play?
It only affects capital accumulation
It reduces depreciation
It has no effect on steady-state GDP
It determines the long-run growth rate of per capita output
In the Solow model, only technological progress leads to sustained per capita growth in the steady state, since capital accumulation faces diminishing returns. Technology shifts the production function upward. For details, see IMF: Solow Model.
What does Okun's coefficient quantify?
Correlation between savings and consumption
Effect of interest rates on investment
Relationship between unemployment changes and GDP growth
Elasticity of inflation to output
Okun's coefficient measures how much GDP growth changes for a given change in unemployment. It is derived from Okun's Law and typically approximates a 2 - 3% GDP change per 1% unemployment shift. See JSTOR: Okun's Law.
What is chain-weighting in real GDP calculation?
Excluding import prices
A moving average of Laspeyres and Paasche indexes
Using fixed base-year weights for all years
Updating weights annually to reflect current consumption patterns
Chain-weighted real GDP updates expenditure shares annually, chaining growth rates to better reflect changes in consumption patterns and relative prices. It reduces substitution bias. More at BEA: Chain-Weighted Measures.
Which index calculates inflation by averaging the Laspeyres and Paasche indexes?
CPI
GDP deflator
Fisher ideal index
Paasche index
The Fisher ideal index is the geometric mean of the Laspeyres and Paasche indexes, balancing the biases of each. It is often considered the best single-period price index. For more, see OECD Glossary: Fisher Index.
What is the Balassa - Samuelson effect?
Trade deficits cause currency depreciation
Higher productivity in tradables raises wage levels and prices of non-tradables
Import tariffs increase domestic inflation
Government spending crowds out private investment
The Balassa - Samuelson effect holds that countries with higher productivity in tradable goods sectors experience higher overall wages, which raises non-tradable prices and PPP exchange rates. This explains why real exchange rates vary with income. More at IMF: Balassa - Samuelson.
Which approach calculates GDP by adding labor and capital incomes plus taxes minus subsidies?
Income approach
Expenditure approach
Production approach
Output-gap approach
The income approach sums wages, rents, interest, and profits plus taxes less subsidies to measure GDP from the income side. It complements the expenditure and production approaches. See BEA: Income Approach.
How is depreciation treated in national accounts?
Subtracted from gross investment to get net investment
Excluded from GNP but included in GDP
Added to government spending
Ignored as a non-market transaction
Depreciation (consumption of fixed capital) is subtracted from gross investment to calculate net investment. Gross domestic product minus depreciation yields net domestic product. Learn more at UN Stats: Depreciation.
What is potential GDP?
Maximum sustainable output without inflationary pressure
Nominal GDP adjusted for exchange rates
GDP excluding government spending
GDP at peak business cycle
Potential GDP is the level of output an economy can sustain at full resource utilization without causing inflation. It is a benchmark for cyclical analysis. Read more at ECB Working Paper: Potential Output.
In endogenous growth theory, which factor can lead to sustained per capita growth without diminishing returns?
Physical capital accumulation
Government consumption
Natural resource extraction
Technological spillovers and human capital
Endogenous growth models incorporate factors like human capital, innovation, and knowledge spillovers that can drive sustained growth without diminishing returns to aggregate capital. This contrasts with the Solow model. For more, see IMF: Endogenous Growth.
Which adjustment estimates GDP by accounting for environmental degradation and resource depletion?
Gross National Happiness
GNP
Nominal GDP
Green GDP
Green GDP adjusts traditional GDP by subtracting costs associated with environmental damage and resource depletion, providing a more sustainable growth measure. It highlights the environmental impact of economic activity. See World Bank: Green GDP.
How do statisticians estimate the size of the informal (shadow) economy for GDP adjustments?
Using electricity consumption and currency demand methods
By excluding small businesses entirely
Assuming a fixed percentage of GDP
Only through household surveys
Methods like the electricity consumption approach and currency demand approach are used to estimate informal economic activity not captured in official statistics. These indirect methods help approximate the shadow economy's size. For more, see IMF Working Paper on Shadow Economy.
What does the coefficient of variation of GDP growth measure?
Gap between nominal and real growth
Difference between public and private GDP
Volatility of growth relative to its mean
Average annual growth rate
The coefficient of variation is the standard deviation of GDP growth divided by its mean, indicating relative volatility. It is used to compare growth stability across countries or periods. See OECD: Coefficient of Variation.
What is a hedonic price index and how is it used in GDP measurement?
An index adjusting for quality changes in products by estimating implicit prices
An index excluding services to focus on goods
An index using only export prices
An index based on consumer surveys
A hedonic price index decomposes product prices into characteristics and estimates the value of each feature, adjusting for quality changes over time. This improves real GDP estimates by controlling for product improvements. Learn more at BLS: Hedonic Pricing.
In GDP accounting, what distinguishes the Fisher ideal index from Paasche and Laspeyres indexes?
It only uses current period weights
It uses nominal GDP as weights
It excludes services from the basket
It is the geometric mean of Laspeyres and Paasche indices
The Fisher ideal index combines the Laspeyres and Paasche indexes by taking their geometric mean, balancing the upward and downward biases. It is considered the 'ideal' single-period price measure. More at OECD: Fisher Index.
What are satellite accounts in national accounting frameworks?
Accounts that record only government spending
Supplementary accounts for specific areas like environment, tourism, or health
Alternate GDP calculations ignoring services
Estimates of GDP based solely on household surveys
Satellite accounts extend the core national accounts to topical areas (e.g., environment, tourism, R&D) without burdening the main GDP framework. They provide detailed analysis of specific sectors. Read more at UN SNA 2008.
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Study Outcomes
Understand GDP Basics -
Learn what gross domestic product measures, including its key components and significance in a gdp quiz context.
Analyze GDP Components -
Break down how consumer spending, investment, government spending, and net exports contribute to overall economic output.
Interpret Economic Growth -
Assess gdp growth rates to gauge the health of an economy and recognize factors that drive expansion or contraction.
Evaluate Fiscal Policy Effects -
Explore how government taxation and spending decisions influence GDP levels, as tested in a fiscal policy quiz format.
Apply GDP Concepts to Trivia -
Use your understanding to tackle gdp trivia questions and enhance retention through practical examples.
Compare Nominal vs. Real GDP -
Differentiate between nominal and real measures of output and understand the role of inflation adjustments in a gross domestic product quiz.
Cheat Sheet
Components of GDP (C+I+G+NX) -
GDP is calculated as the sum of Consumption, Investment, Government spending, and Net exports (GDP = C + I + G + (X - M)). Remembering "CIG-M" can help you ace the gdp quiz by keeping each component in mind. The U.S. Bureau of Economic Analysis (BEA) provides real-world data for these categories.
Nominal vs. Real GDP -
Nominal GDP measures output using current prices, while Real GDP adjusts for inflation by using constant prices from a base year. A handy mnemonic is "N for Now prices, R for Retrospective constant prices." The IMF's World Economic Outlook explains how real GDP reveals true growth over time.
GDP Deflator and Inflation -
The GDP deflator indexes the price level of all domestically produced goods and services: Deflator = (Nominal GDP ÷ Real GDP) × 100. Use it to convert nominal figures into real terms and tackle any gross domestic product quiz question on inflation. The World Bank offers historical deflator data for practice.
Expenditure Approach Deep Dive -
The expenditure approach breaks down spending by households, businesses, and government plus net exports. For an economic growth quiz, practice examples like: If C=$1,000, I=$500, G=$300, X=$200, M=$150, then GDP = $1,850. University of California courses often include similar practice problems.
GDP Growth Rate Calculation -
GDP growth rate = [(GDP this year - GDP last year) ÷ GDP last year] × 100. Memorize "ΔGDP over old GDP times 100" to breeze through fiscal policy quiz questions on growth trends. The OECD publishes reliable quarterly growth data for comparison.
