National Income and Output: Measuring Economic Growth and Performance

Question 1

Which of the following is excluded from the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Foreign direct investment

Answer

Consumer spending

Answer

Government spending

Answer

Net exports

Question 2

Which measure of output represents the value of all final goods and services produced within a nation's borders in a given year?

Accepted Answer

Gross Domestic Product (GDP)

Answer

Gross National Product (GNP)

Answer

Net National Product (NNP)

Answer

Disposable Personal Income (DPI)

Question 3

The formula for calculating GDP using the expenditure approach is:

Accepted Answer

GDP = C + I + G + NX

Answer

GDP = Y - T + D

Answer

GDP = W + R + I + P

Answer

GDP = C + S + I + NX

Question 4

The business cycle refers to:

Accepted Answer

Recurring fluctuations in economic activity over time

Answer

Seasonal variations in employment

Answer

Long-term trends in economic output

Answer

Short-term fluctuations in inflation

Question 5

The Consumer Price Index (CPI) measures:

Accepted Answer

Changes in the prices of a basket of goods and services

Answer

Wages and salaries

Answer

Interest rates

Answer

Exchange rates

Question 6

The primary objective of fiscal policy is to:

Accepted Answer

Manage government spending and taxation

Answer

Control inflation

Answer

Regulate interest rates

Answer

Promote international trade

Question 7

How does unemployment affect the economic growth rate of a country?

Accepted Answer

It slows economic growth by reducing production, spending, and investment.

Answer

It boosts economic growth by increasing the labor force.

Answer

It has no significant impact on economic growth.

Question 8

Which metric is the primary indicator of economic growth?

Accepted Answer

Gross domestic product (GDP)

Answer

National income

Answer

Consumer price index (CPI)

Answer

Unemployment rate

Question 9

Explain how government spending and fiscal policy influence national income and output. Discuss their potential impact on economic growth, employment, and inflation.

Accepted Answer

Fiscal policy can significantly influence national income and output.

Answer

Government spending and fiscal policy primarily affect economic growth in the long run.

Answer

Expansionary fiscal policy can stimulate economic growth without causing inflation.

Answer

Government spending can create jobs but has no impact on unemployment.

Question 10

What is the key difference between nominal GDP and real GDP?

Accepted Answer

Adjusts for inflation

Answer

Uses a base year for price adjustment

Answer

Includes different components

Answer

Serves different purposes in economic analysis

Question 11

How can government fiscal and monetary policies affect economic growth, national income, and overall economic well-being?

Accepted Answer

Fiscal and monetary policies can stimulate growth in the short term, but their long-term effects can be mixed.

Answer

Government policies can always boost economic growth.

Answer

Government policies have no impact on the economy.

Question 12

Which of the following measures the total value of all final goods and services produced within a country's borders in a specific time period?

Accepted Answer

Gross Domestic Product (GDP)

Answer

Gross National Product (GNP)

Answer

National Income

Answer

Disposable Income

Question 13

Which component of GDP includes spending by businesses on new equipment, buildings, and inventories?

Accepted Answer

Investment

Answer

Consumption

Answer

Government Spending

Answer

Net Exports

Question 14

What is the difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP measures output using current prices, while real GDP uses constant prices.

Answer

Real GDP measures output using current prices, while nominal GDP uses constant prices.

Answer

Nominal GDP includes all goods and services, while real GDP excludes intermediate goods.

Answer

Real GDP includes all goods and services, while nominal GDP excludes intermediate goods.

Question 15

What is the formula for calculating the GDP deflator?

Accepted Answer

GDP Deflator = (Nominal GDP / Real GDP) x 100

Answer

GDP Deflator = (Real GDP / Nominal GDP) x 100

Answer

GDP Deflator = (CPI / PPI) x 100

Answer

GDP Deflator = (PPI / CPI) x 100

Question 16

Explain the relationship between inflation and economic growth.

Accepted Answer

Inflation can stimulate economic growth in the short term, but may hinder it in the long term.

Answer

Inflation always has a positive impact on economic growth.

Answer

Inflation always has a negative impact on economic growth.

Answer

There is no relationship between inflation and economic growth.

Question 17

Which of the following measures the overall price level?

Accepted Answer

Consumer Price Index (CPI)

Answer

Producer Price Index (PPI)

Answer

Personal Consumption Expenditures (PCE)

Answer

Gross Domestic Product (GDP)

Question 18

Which of the following is included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Government spending on education

Accepted Answer

Exports minus imports

Answer

The value of household chores

Answer

Financial transactions between individuals

Question 19

Which of the following is NOT included when calculating Gross Domestic Product (GDP)?

Accepted Answer

Economic value of unpaid labor, such as homemaking

Answer

Value of consumer purchases

Answer

Value of government spending

Answer

Net exports (exports minus imports)

Question 20

Which of the following is NOT a commonly used method for calculating national income?

Accepted Answer

Gross National Well-being (GNW)

Answer

Gross Domestic Product (GDP)

Answer

Gross National Product (GNP)

Answer

Net National Product (NNP)

Question 21

Which factor is crucial for countries to experience long-term economic growth?

Accepted Answer

Technological progress

Answer

Government expenditures

Answer

Abundant natural resources

Answer

Favorable currency exchange rates

Question 22

Which of the components below is included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Government spending on goods and services

Answer

Personal savings

Answer

Transfer payments

Answer

Interest payments on foreign debt

Question 23

Define the difference between real GDP and nominal GDP.

Accepted Answer

Real GDP adjusts for inflation while nominal GDP does not.

Answer

Real GDP measures output over time, while nominal GDP measures output in a single year.

Answer

Nominal GDP includes only goods and services produced domestically, while real GDP includes imports and exports.

Question 24

Identify the metric that serves as a measure of economic growth.

Accepted Answer

Percentage change in real GDP over time

Answer

Exchange rate

Answer

Consumer Price Index

Answer

Unemployment rate

Question 25

Explain the relationship between economic growth and the living standards of a population.

Accepted Answer

Economic growth can positively impact living standards by increasing productivity, wages, and consumption.

Answer

Economic growth always reduces living standards because it depletes natural resources.

Question 26

Which factor among the following positively contributes to economic growth?

Accepted Answer

Advancements in technology

Answer

Political instability

Answer

Rapid population growth

Answer

Natural disasters

Question 27

Describe the primary purpose of the Consumer Price Index (CPI).

Accepted Answer

To measure the average change in prices over time for a basket of frequently purchased goods and services.

Answer

To predict future economic conditions.

Answer

To track changes in the value of the US dollar.

Question 28

Explain the relationship between inflation and economic growth.

Accepted Answer

High inflation can harm economic growth by discouraging investment and consumption.

Answer

Inflation invariably stimulates economic growth.

Answer

Inflation has a neutral impact on economic growth.

Question 29

Which among the following options is a potential cause of unemployment?

Accepted Answer

Technological advancements

Answer

Increased government spending

Answer

Strong economic growth

Answer

Low interest rates

Question 30

Identify the different types of unemployment.

Accepted Answer

Frictional, structural, and cyclical

Answer

Voluntary and involuntary

Answer

Long-term and short-term

Answer

High-skill and low-skill

Question 31

Explain the potential consequences of persistently high unemployment.

Accepted Answer

Increased poverty and social unrest

Answer

Increased economic growth

Answer

Lower inflation

Answer

Reduced government spending

Question 32

Which of the following is NOT a component of Gross Domestic Product (GDP)?

Accepted Answer

Foreign Direct Investment

Answer

Business Investment

Answer

Personal Consumption Expenditure

Answer

Government Spending

Question 33

What formula calculates Nominal GDP?

Accepted Answer

PQ

Answer

P / Q

Answer

(P - Q) / 100

Answer

100 * (Q / P)

Question 34

Which measure of inflation tracks price changes in a fixed set of goods and services over time?

Accepted Answer

Consumer Price Index (CPI)

Answer

Wholesale Price Index (WPI)

Answer

Producer Price Index (PPI)

Answer

Dow Jones Industrial Average

Question 35

What term describes economic growth that outpaces population growth?

Accepted Answer

Real Economic Growth

Answer

Nominal Economic Growth

Answer

Stagflation

Answer

Hyperinflation

Question 36

What is the primary distinction between a recession and a depression?

Accepted Answer

Duration and severity

Answer

Type of economic activity affected

Answer

Causes

Answer

Government response

Question 37

Which of the following is a potential advantage of economic growth?

Accepted Answer

Improved standard of living

Answer

Inflation

Answer

Environmental degradation

Answer

Increased unemployment

Question 38

What role does fiscal policy play in economic management?

Accepted Answer

Adjusting government spending and taxation

Answer

Printing money

Answer

Deregulation

Answer

Establishing interest rates

Question 39

Which is a fundamental principle of Keynesian economics?

Accepted Answer

Government spending influences aggregate demand

Answer

Government intervention is unneeded

Answer

The economy naturally operates at full employment

Question 40

How is national output related to the Production Possibilities Curve (PPC)?

Accepted Answer

National output is on or below the PPC

Answer

National output is independent of the PPC

Answer

National output is always above the PPC

Answer

The PPC is irrelevant to national output

Question 41

Which of the following is NOT considered a component of Gross Domestic Product (GDP)?

Accepted Answer

Foreign investments received

Answer

Business investments

Answer

Consumer spending

Answer

Government spending

Question 42

The formula for calculating Real GDP is:

Accepted Answer

(Current GDP / Price Index) x 100

Answer

(Current GDP + Price Index) / 100

Answer

(Price Index / Current GDP) x 100

Answer

(Price Index - Current GDP) / 100

Question 43

Which of the following is an advantage of using GDP as a measure of economic output?

Accepted Answer

It provides a comprehensive assessment of economic activity within a country's borders.

Answer

It is a real-time indicator of economic performance.

Answer

It is unaffected by price level changes.

Answer

It is easily comparable between countries with different economic structures.

Question 44

The price level used in calculating Real GDP is:

Accepted Answer

Base year prices

Answer

Future year prices

Answer

Average of past year prices

Answer

Current year prices

Question 45

The unemployment rate measures:

Accepted Answer

The percentage of the labor force that is actively seeking employment but unable to find it.

Answer

The average length of unemployment spells.

Answer

The number of people receiving unemployment benefits.

Question 46

Which of the following is a potential consequence of high unemployment?

Accepted Answer

Reduced consumer spending, leading to a decrease in aggregate demand

Answer

Higher inflation rate due to increased wage demands

Answer

Expansionary fiscal policy implemented to stimulate economic growth

Answer

Increased government revenue from higher tax collections

Question 47

Okun's Law describes the relationship between:

Accepted Answer

Unemployment and GDP, suggesting that a 1% increase in unemployment leads to a 2% decline in GDP

Answer

GDP growth and inflation, showing that a 1% increase in GDP growth leads to a 2% increase in inflation

Answer

Inflation and unemployment, indicating that a 1% increase in inflation leads to a 2% increase in unemployment

Question 48

Which of the following is a measure of economic growth?

Accepted Answer

GDP Growth Rate

Answer

Unemployment Rate

Answer

Inflation Rate

Answer

Balance of Trade

Question 49

The primary objective of fiscal policy is to:

Accepted Answer

Influence the overall level of economic activity, particularly aggregate demand

Answer

Set interest rates to influence borrowing and lending activities

Answer

Control the money supply in circulation

Answer

Manage foreign exchange rates to maintain the value of the domestic currency

Question 50

Which of the following is explicitly excluded from the calculation of gross domestic product (GDP)?

Accepted Answer

Government transfer payments

Answer

Consumer spending

Answer

Business investment

Answer

Government purchases of goods and services

Question 51

Which of the following is not considered a strength of using real GDP as a measure of economic activity?

Accepted Answer

It is not affected by price changes

Answer

It adjusts for inflation

Answer

It allows for comparisons over time

Answer

It is a comprehensive measure of output

Question 52

What is the primary formula used to calculate the annual percentage change in real GDP (economic growth)?

Accepted Answer

[(Current year's real GDP - Previous year's real GDP) / Previous year's real GDP] x 100%

Answer

[(Current year's real GDP + Previous year's real GDP) / Previous year's real GDP] x 100%

Answer

[(Previous year's real GDP - Current year's real GDP) / Current year's real GDP] x 100%

Answer

[(Current year's real GDP - Previous year's real GDP) / Current year's real GDP]

Question 53

Which of the following factors is most likely to lead to an increase in a country's potential GDP?

Accepted Answer

Advancements in technology

Answer

Government budget deficits

Answer

Frequent natural disasters

Answer

High levels of inflation

Question 54

What is the primary purpose of the circular flow of income model?

Accepted Answer

To demonstrate the interdependence and flow of income, goods, and services within an economy

Answer

To determine the causes and effects of inflation

Answer

To calculate the national debt

Question 55

Which of the following is a recognized limitation of using GDP as a measure of economic well-being?

Accepted Answer

It does not account for non-market production or leisure time

Answer

It is difficult for economists to interpret

Answer

It is calculated too frequently

Answer

It is only available for developed countries

Question 56

According to Keynesian economics, which policy tool can be used to stimulate aggregate demand and increase economic output?

Accepted Answer

Expansionary fiscal policy (e.g., increased government spending)

Answer

Raising interest rates

Answer

Balanced budget

Answer

Tax increases

Question 57

What is the relationship between per capita GDP and the standard of living of a country's citizens?

Accepted Answer

Generally, higher per capita GDP is associated with a higher standard of living

Answer

Standard of living is more important than per capita GDP

Answer

Per capita GDP is not related to the standard of living