Question

1. Only final goods should be counted while calculating GDP:

a. To account for deflation.

b. To account for inflation.

c. To account for the price index.

d. To avoid multiple counting.

2. Real variables:

a. Do not account for inflation.

b. Account for inflation.

c. Account for growth.

d. Do not account for growth.

3. “If the value of the output produced by US citizens living outside USA is greater than the value of output produced by foreigners living in US, then US GNP can be ______ US GDP.”

a. equal to

b.less than

c. equivalent

d. greater than

4. Due to the COVID-19, Americans have chosen to cook more at home and eat less at restaurants. This change in behavior, by itself, has

a. reduced measured GDP.

b.not affected measured GDP.

c. increased measured GDP only to the extent that the value of the restaurant meals exceeded the value of meals previously cooked at home.

d. increased measured GDP by the full value of the restaurant meals.

5. Wages and salaries will be component of the ________ approach to measuring US GDP:

a. Expenditure

b. Income

c. Value-Added Approach

d. Product Approach

6. If a US gun manufacturer decreases the price of rifles it sells to the US army, its price drop will decrease   __________________ .

a. Producer Price Index.

b. GDP deflator

c. Personal Consumption Expenditure Index.

d. Consumer Price Index

7. Which of the following is a problem of measuring GDP?

a. It does not account for inflation.

b. It does not include public goods.

c. It does not include black market transactions.

d. It does not include taxes.

8. GDP can be considered to be a good measure of economic well-being because:

a. Countries with higher GDP have a relatively better inflation.

b. Countries with higher GDP have a relatively better standard of living.

c. Countries with lower GDP have a relatively better standard of living.

d. Countries with higher GDP have a relatively worse standard of living.

Answer 1

1. While calculating the GDP, only the final goods are considered because they would otherwise be counted twice; once at intermediate level (raw material) and then at the final goods. Hence d is the correct answer.

2. Variables are those variables that measure the value at a given fixed price and not the current price and hence it does not take into account the changes in the price level between fixed period and current period and hence avoid the inflation. Thus, a is the correct answer.

3. GDP is the total output produced by a country within its borders in a given period while the GNP includes the output produced both inside and outside the country by its citizens. So, when output value luving outside USA is greater then output produced by foriegners living in the domestic terrorties, then we can say that GNP (the former) can be greater than GDP (the latter). Note that the GDP would have component of citoizens produced in the country. So, from the options we can sau that d is the correct answer.

4. Due to Covid-19, people choosing to cook more at home have reduced the measured GDP because the costr of meal at restaurant which was previously counted in GDP is greater than the ocst of mean produced at home. Hence a is the correct answer.

5. Wages and salaries being the aprt of the income are included in the income approach to measure the GDP. Thus b is the correct answer.