Gross Domestic Product (GDP): Definition, Formula, and Importance

Question 1

Which of these is NOT included when calculating GDP?

Accepted Answer

Transfer payments

Answer

Consumption expenditure

Answer

Government expenditure

Answer

Investment

Question 2

Which of the following is NOT a component of GDP?

Accepted Answer

Interest payments to foreign banks

Answer

Consumption of goods and services

Answer

Investment in new capital

Answer

Government spending

Question 3

GDP per capita is a measure of:

Accepted Answer

Gross domestic product divided by population

Answer

Average income per person

Answer

Total income of the country

Answer

Standard of living

Question 4

The formula for calculating GDP using the expenditure approach is:

Accepted Answer

GDP = C + I + G + (X - M)

Answer

GDP = Y - C

Answer

GDP = P + I

Answer

GDP = C + S

Question 5

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

Accepted Answer

GDP per capita

Answer

Consumer spending

Answer

Government spending

Answer

Net exports

Question 6

What is the formula for calculating GDP using the expenditure approach?

Accepted Answer

GDP = C + I + G + (X - M)

Answer

GDP = C + S + T

Answer

GDP = (Y - T)

Answer

GDP = (PQ) / 2

Question 7

What is the relationship between GDP and economic growth?

Accepted Answer

GDP growth measures the percentage change in GDP over time

Answer

Economic growth occurs when GDP remains stable

Answer

GDP and economic growth are opposite concepts

Answer

Economic growth measures the improvement in living standards

Question 8

Which of the following is a benefit of using GDP as a measure of economic performance?

Accepted Answer

It provides a comprehensive measure of economic activity

Answer

It accurately represents the income of all citizens

Answer

It can only be used to compare economic trends

Answer

It is not influenced by inflation

Question 9

What is the term used to describe an increase in GDP accompanied by a decrease in inflation?

Accepted Answer

Expansion

Answer

Stagflation

Answer

Economic recovery

Answer

Hyperinflation

Question 10

Which of the following is NOT a potential impact of economic growth?

Accepted Answer

Increased poverty

Answer

Increased employment

Answer

Improved living standards

Answer

Environmental degradation

Question 11

GDP is calculated by summing the value of all:

Accepted Answer

Final goods and services produced within a country's borders

Answer

Imported goods and services

Answer

Intermediate goods and services produced within a country's borders

Answer

Second-hand goods sold within a country's borders

Question 12

GDP is often used as an indicator of:

Accepted Answer

A country's economic performance

Answer

A country's level of happiness

Answer

A country's political stability

Answer

A country's environmental sustainability

Question 13

GDP is expressed in:

Accepted Answer

Monetary value

Answer

Physical units

Answer

Percentage change

Answer

Hours worked

Question 14

Which of the following is a key limitation of using Gross Domestic Product (GDP)?

Accepted Answer

It does not measure the fairness of income distribution.

Answer

It includes the value of non-market activities.

Answer

Its calculation is straightforward and accurate.

Answer

It is solely applicable to developed economies.

Question 15

GDP per capita refers to:

Accepted Answer

The average income of a country's citizens.

Answer

The overall value of goods and services an economy produces.

Answer

The revenue collected by the government.

Answer

The rate at which an economy expands.

Question 16

Which of the following changes in GDP would be favorable for an economy?

Accepted Answer

An increase

Answer

A decrease

Answer

No change

Answer

A negative change

Question 17

When calculating a country's GDP, how is depreciation factored in?

Accepted Answer

It's subtracted because it represents a decrease in capital value.

Answer

It's added as an investment in new capital.

Answer

It's not considered in GDP calculations because it doesn't impact economic output.

Question 18

Which economic measure accounts for the income earned by a country's citizens, regardless of where the production takes place?

Accepted Answer

GNP (Gross National Product)

Answer

GDP (Gross Domestic Product)

Question 19

How do policymakers use GDP to make decisions about fiscal and monetary policies?

Accepted Answer

Set interest rates and government spending

Answer

Compare economic performance between countries

Answer

Predict future economic performance

Answer

Calculate individual income taxes

Question 20

Which of the following is not considered a component of GDP?

Accepted Answer

Imports

Answer

Consumption spending

Answer

Investment spending

Answer

Government spending

Question 21

The time period over which GDP is typically measured is known as a:

Accepted Answer

Quarter

Answer

Year

Answer

Month

Answer

Week

Question 22

Which factor would contribute to an increase in a country's GDP?

Accepted Answer

Increased exports

Answer

Increased imports

Answer

Natural disasters

Answer

Economic recessions

Question 23

GDP can be expressed in two primary ways. What are they?

Accepted Answer

Nominal and real

Answer

Current and constant

Answer

Market and factor

Answer

Gross and net

Question 24

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

Accepted Answer

Nominal GDP is measured in current prices, while real GDP is measured in constant prices.

Answer

Nominal GDP includes inflation, while real GDP does not.

Answer

Real GDP includes inflation, while nominal GDP does not.

Answer

They represent the same concept.

Question 25

The formula for calculating GDP per capita, which represents the average income per person in a country, is:

Accepted Answer

GDP divided by population

Answer

GDP multiplied by population

Answer

Population divided by GDP

Answer

GDP per capita cannot be calculated.

Question 26

Which of the following items is **not** included when calculating a country's Gross Domestic Product (GDP)?

Accepted Answer

Income earned by workers while abroad

Answer

Spending by households on goods and services

Answer

Government expenditure on infrastructure

Answer

Difference between a country's exports and imports

Question 27

Which of the following is NOT a component of GDP?

Accepted Answer

Imports

Answer

Consumption

Answer

Investment

Answer

Government spending

Question 28

Expansionary fiscal policy involves:

Accepted Answer

Both increasing government spending and decreasing taxes

Answer

Increasing government spending

Answer

Decreasing taxes

Answer

Neither increasing government spending nor decreasing taxes

Question 29

A high GDP growth rate usually indicates:

Accepted Answer

Economic expansion

Answer

Economic recession

Answer

Economic stagnation

Answer

Economic recovery

Question 30

PPP stands for:

Accepted Answer

Purchasing Power Parity

Answer

Price Parity Policy

Answer

Public Policy Plan

Answer

Purchasing Parity Price

Question 31

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

Accepted Answer

Gross Domestic Product

Answer

Gross National Income

Answer

National Income

Answer

Net National Income

Question 32

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

Accepted Answer

Real GDP is adjusted for inflation, while nominal GDP is not.

Answer

Nominal GDP is adjusted for inflation, while real GDP is not.

Answer

They represent different time periods.

Answer

They measure different aspects of economic activity.

Question 33

Which type of expenditure refers to the purchase of newly produced goods and services for immediate use, contributing to overall consumer demand?

Accepted Answer

Consumption

Answer

Investment

Answer

Saving

Answer

Government spending

Question 34

Which measure represents the total income earned by factors of production within a country's borders, regardless of the residency of the owners of those factors?

Accepted Answer

Gross National Product (GNP)

Answer

Gross Domestic Product (GDP)

Answer

National Income

Answer

Net National Product (NNP)

Question 35

What is the primary purpose of using Gross Domestic Product (GDP) data in economic analysis?

Accepted Answer

To evaluate a country's overall economic performance

Answer

To predict future economic trends

Answer

To measure the level of unemployment in a country

Answer

To compare the economic performance of different industries

Question 36

Which of the following is NOT included as a component of GDP?

Accepted Answer

Foreign aid received

Answer

Consumer spending

Answer

Government spending

Answer

Business investment

Question 37

What is the formula used to calculate GDP?

Accepted Answer

GDP = Consumption + Investment + Government Spending + (Exports - Imports)

Answer

GDP = Consumption + Investment + Government Spending

Answer

GDP = Consumption - Investment - Government Spending

Answer

GDP = Investment + Government Spending - (Exports + Imports)

Question 38

What is the distinction between nominal GDP and real GDP?

Accepted Answer

Nominal GDP measures current prices, while real GDP adjusts for inflation.

Answer

Real GDP measures current prices, while nominal GDP adjusts for inflation.

Answer

Nominal GDP measures constant prices, while real GDP adjusts for population growth.

Answer

Real GDP measures constant prices, while nominal GDP adjusts for population growth.

Question 39

What is the relationship between economic growth and overall economic development?

Accepted Answer

Economic growth is a necessary condition for sustained economic development.

Answer

Economic development is a necessary condition for sustained economic growth.

Answer

Economic growth and economic development are independent of each other.

Answer

There is no relationship between economic growth and economic development.

Question 40

What is the purpose of using GDP per capita?

Accepted Answer

To compare living standards between countries.

Answer

To measure a country's overall productivity.

Answer

To determine the distribution of wealth within a country.

Answer

To predict future economic growth.

Question 41

Which of the following is excluded from the calculation of a country's Gross Domestic Product (GDP)?

Accepted Answer

Transfer payments

Answer

Government spending

Answer

Investment

Answer

Consumption

Question 42

What is the key difference between the measurement of Gross National Income (GNI) and Gross Domestic Product (GDP)?

Accepted Answer

GNI measures income earned by residents of a country, regardless of geographical location, while GDP measures income generated within the country's borders.

Answer

GDP measures income generated within a country by both residents and non-residents, while GNI only includes income earned by residents.

Answer

GNI is always numerically higher than GDP.

Answer

Both GNI and GDP equally capture a country's economic performance.

Question 43

Gross Domestic Product (GDP) measures the total annual monetary value of:

Accepted Answer

Goods and services produced within a country's borders

Answer

Money spent by the government

Answer

Finished goods exported

Answer

Assets owned by businesses

Question 44

Which of the following is NOT a component of GDP?

Accepted Answer

Income from investments

Answer

Consumption expenditure by households

Answer

Government expenditure

Answer

Net exports

Question 45

GDP can be calculated using the expenditure approach. Which of the following is NOT included in this approach?

Accepted Answer

Income earned by workers

Answer

Household spending

Answer

Business investment

Answer

Government spending

Question 46

Real GDP:

Accepted Answer

Adjusts for inflation to reflect actual changes in production

Answer

Measures the total value of production

Answer

Is always higher than nominal GDP

Answer

Does not consider the prices of goods and services

Question 47

Which of the following can contribute to an increase in GDP?

Accepted Answer

Increased consumer spending

Answer

Increased government borrowing

Answer

Natural disasters

Answer

Economic recession

Question 48

The difference between nominal GDP and real GDP is primarily due to:

Accepted Answer

Inflation

Answer

Population growth

Answer

Government expenditure

Answer

Net exports

Question 49

Which of the following statements about GDP is most accurate?

Accepted Answer

GDP measures production within a country's borders regardless of ownership

Answer

GDP is the most comprehensive measure of economic well-being

Answer

GDP is the only indicator of economic performance

Answer

GDP can be used to compare economies of different sizes

Question 50

Which of the following is explicitly excluded from the calculation of GDP?

Accepted Answer

Transfer payments

Answer

Government spending

Answer

Exports

Answer

Business investment

Question 51

Gross Domestic Product (GDP) measures:

Accepted Answer

The total value of finished goods and services produced within a country's borders in a specific period

Answer

The total income earned by all individuals in an economy

Answer

The total amount of money in circulation in an economy

Question 52

Which of the following factors would typically NOT contribute to an increase in GDP?

Accepted Answer

A decrease in investment spending by businesses

Answer

An increase in exports

Answer

An increase in government spending

Answer

An increase in consumer spending

Question 53

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

Accepted Answer

Real GDP adjusts for inflation, while nominal GDP does not, providing a more accurate measure of economic growth.

Answer

Nominal GDP includes imports, while real GDP does not.

Answer

Real GDP is measured in constant prices, while nominal GDP is measured in current prices.

Question 54

A country has a GDP of $1 trillion and a population of 60 million. What is its GDP per capita?

Accepted Answer

$16,667

Answer

$1,000,000

Answer

$600,000

Answer

$100,000

Question 55

Which of the following would be counted as part of GDP using the expenditure approach?

Accepted Answer

Business investment in machinery

Answer

Transfer payments to individuals

Answer

Sale of used cars between individuals

Answer

Interest payments on government debt

Question 56

The primary difference between GDP and Gross National Income (GNI) is that:

Accepted Answer

GNI includes income earned by residents of a country abroad, while GDP does not.

Answer

GNI is measured in constant prices, while GDP is measured in current prices.

Answer

GDP is a measure of economic activity, while GNI is a measure of economic well-being.