GDP and Economic Growth: Learn and Test Your Knowledge

Question 1

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

Accepted Answer

Gross exports

Answer

Consumption

Answer

Investment

Answer

Government spending

Question 2

How do we calculate GDP per capita?

Accepted Answer

GDP divided by population

Answer

Population divided by GDP

Answer

GDP multiplied by population

Answer

Population multiplied by GDP per capita

Question 3

According to the conventional definition, what constitutes a recession?

Accepted Answer

A period of two consecutive quarters of negative GDP growth

Answer

A period of one year of negative GDP growth

Answer

A period of slow economic growth

Answer

A period of high unemployment

Question 4

What is the relationship between GDP and unemployment?

Accepted Answer

The relationship between GDP and unemployment can vary and is complex.

Answer

GDP and unemployment typically have an inverse relationship.

Answer

GDP and unemployment typically have a direct relationship.

Answer

There is no relationship between GDP and unemployment.

Question 5

Which of the following does NOT contribute to economic growth?

Accepted Answer

Reduced government spending

Answer

Increased productivity

Answer

Technological advancements

Answer

Increased investment

Question 6

What is the difference between short-term and long-term economic growth?

Accepted Answer

Short-term growth is usually driven by government spending, while long-term growth is driven by investment and innovation.

Answer

Long-term growth is usually driven by government spending, while short-term growth is driven by investment and innovation.

Answer

There is no difference between short-term and long-term economic growth.

Answer

Short-term growth is driven by supply-side factors, while long-term growth is driven by demand-side factors.

Question 7

What is the primary purpose of using GDP per capita as a measure of economic development?

Accepted Answer

To compare living standards across countries.

Answer

To measure the overall size of an economy.

Answer

To track economic growth over time.

Answer

To identify factors contributing to economic growth.

Question 8

Define Gross Domestic Product (GDP).

Accepted Answer

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

Answer

The total income earned by individuals and businesses within a country's borders in a specific period of time

Answer

The total expenditure on goods and services by consumers, businesses, and governments within a country's borders in a specific time frame

Question 9

Explain the distinction between real and nominal GDP.

Accepted Answer

Real GDP accounts for inflation, while nominal GDP does not.

Answer

Nominal GDP accounts for inflation, while real GDP does not.

Answer

Real GDP measures only the value of goods produced, while nominal GDP includes services.

Answer

Real GDP and nominal GDP are identical concepts.

Question 10

Differentiate between nominal and real GDP.

Accepted Answer

Nominal GDP measures current market prices, while real GDP uses constant base year prices.

Answer

Nominal GDP includes inflation, while real GDP does not.

Answer

Real GDP includes inflation, while nominal GDP does not.

Answer

Real GDP measures current market prices, while nominal GDP uses constant base year prices.

Question 11

Explain the relationship between GDP and economic growth.

Accepted Answer

GDP is a measure of economic growth.

Answer

GDP is synonymous with economic growth.

Answer

Economic growth is a measure of GDP.

Answer

GDP and economic growth are unrelated.

Question 12

Distinguish between extensive and intensive economic growth.

Accepted Answer

Extensive growth involves increasing inputs (e.g., labor, capital) while intensive growth focuses on improving productivity through technological advancements.

Answer

Intensive growth involves increasing inputs (e.g., labor, capital) while extensive growth focuses on improving productivity through technological advancements.

Answer

Extensive and intensive growth are essentially the same concept.

Answer

Economic growth can only occur through extensive or intensive means, not both.

Question 13

GDP primarily measures the total value of:

Accepted Answer

Goods and services produced within a country's borders in a given year

Answer

Goods and services consumed within a country's borders in a given year

Answer

Goods and services traded within a country's borders in a given year

Answer

Goods and services exported from a country in a given year

Question 14

A country with a high GDP per capita is generally considered to be:

Accepted Answer

More economically developed

Answer

Less economically developed

Answer

Neither more nor less economically developed

Answer

Both more and less economically developed

Question 15

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

Accepted Answer

Real GDP adjusts for inflation, while nominal GDP does not.

Answer

Nominal GDP adjusts for inflation, while real GDP does not.

Answer

Nominal GDP measures the total value of goods and services produced, while real GDP measures the total value of goods and services consumed.

Answer

There is no substantial difference between nominal GDP and real GDP.

Question 16

A decrease in interest rates is likely to:

Accepted Answer

Encourage businesses to invest more

Answer

Discourage consumers from spending

Answer

Have no effect on economic growth

Answer

Both encourage businesses to invest more and discourage consumers from spending

Question 17

Which government agency is responsible for calculating Gross Domestic Product (GDP) in the United Kingdom?

Accepted Answer

Office for National Statistics (ONS)

Answer

Bank of England

Answer

Her Majesty's Revenue and Customs (HMRC)

Answer

Department for Business, Energy and Industrial Strategy (BEIS)

Question 18

GDP primarily measures:

Accepted Answer

The market value of all final goods and services produced within a country's borders

Answer

The combined income earned by a country's citizens

Answer

The average wealth of a country's citizens

Answer

The total savings of a country's businesses

Question 19

What is the primary purpose of using GDP as an economic indicator?

Accepted Answer

To gauge the overall health and performance of an economy

Answer

To compare economic performance between countries

Answer

To measure the average income of citizens

Answer

To predict future economic trends

Question 20

What is the main difference between nominal GDP and real 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 are essentially the same measure.

Answer

Nominal GDP is only used for developed countries, while real GDP is only used for developing countries.

Question 21

How is GDP calculated using the income approach?

Accepted Answer

GDP = Compensation of employees + Wages and salaries + Rental income + Business profits

Answer

GDP = Consumption + Investment + Government spending + Exports - Imports

Answer

GDP = Net exports + Government spending + Personal consumption expenditures

Answer

GDP = (Government spending - Taxes) + (Exports - Imports)

Question 22

How does the relationship between GDP and unemployment typically behave?

Accepted Answer

They can be either positively or negatively correlated, depending on economic conditions

Answer

They are always positively correlated

Answer

They are always negatively correlated

Answer

There is no relationship between them

Question 23

Which of these is NOT included in the calculation of GDP?

Accepted Answer

Gross domestic income

Answer

Government spending

Answer

Household consumption

Answer

Net exports

Question 24

Which formula is used to calculate GDP using the expenditure approach?

Accepted Answer

GDP = C + I + G + NX

Answer

GDP = Y - T

Answer

GDP = P * Q

Answer

GDP = M1 * V

Question 25

How does nominal GDP differ from 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 are calculated in the same way

Question 26

Does GDP accurately measure economic well-being?

Accepted Answer

No, GDP does not always reflect economic well-being

Answer

Yes, GDP is a direct measure of economic well-being

Answer

Economic well-being has no relationship with GDP

Answer

GDP is only a measure of economic growth

Question 27

What is the definition of 'sustainable economic growth'?

Accepted Answer

Economic growth that protects the environment

Answer

Economic growth that continues over a long period

Answer

Economic growth that benefits everyone in society

Answer

Economic growth that is driven by technology

Question 28

How is GDP calculated using the expenditure approach?

Accepted Answer

GDP = Consumption + Investment + Government spending + Net exports

Answer

GDP = Consumption + Savings + Investment

Answer

GDP = Output - Input

Answer

GDP = Imports - Exports

Question 29

Which concept allows for the comparison of economic growth across countries with different price levels?

Accepted Answer

Purchasing power parity (PPP)-adjusted GDP

Answer

Nominal GDP

Answer

Real GDP

Answer

Per capita GDP

Question 30

What is the term used to describe an economy that is experiencing both high inflation and high unemployment?

Accepted Answer

Stagflation

Answer

Hyperinflation

Answer

Deflation

Answer

Depression

Question 31

What is a key tenet of the Keynesian approach to economic growth?

Accepted Answer

Government spending and monetary policy can stimulate aggregate demand.

Answer

Fiscal austerity is necessary for sustained growth.

Answer

Reducing government regulations promotes business investment.

Answer

Maintaining a balanced budget is crucial for economic stability.

Question 32

Which of the following is NOT included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Imports of goods and services

Answer

Spending on final goods and services by households

Answer

Investment spending by businesses

Answer

Government spending on infrastructure

Question 33

Which type of GDP measurement adjusts for inflation?

Accepted Answer

Real GDP

Answer

Nominal GDP

Answer

Historical GDP

Answer

Projected GDP

Question 34

What is the relationship between GDP and disposable income?

Accepted Answer

The relationship varies depending on factors like taxes and government spending

Answer

GDP is always greater than disposable income

Answer

Disposable income is always greater than GDP

Answer

GDP and disposable income are always equal

Question 35

Which of the following is NOT an element that contributes to GDP?

Accepted Answer

Purchase of a used car

Answer

Construction of a new factory

Answer

Government spending on education

Answer

Exports of goods and services

Question 36

The distinction between nominal GDP and real GDP is:

Accepted Answer

The level of inflation

Answer

The exchange rate

Answer

The population size

Answer

Government spending

Question 37

Which fiscal policy measure is commonly employed to stimulate economic growth?

Accepted Answer

Lowering income tax

Answer

Raising taxes

Answer

Reducing government spending

Answer

Increasing interest rates

Question 38

A higher GDP per capita is generally associated with:

Accepted Answer

A more developed nation

Answer

Greater political stability

Answer

Reduced inequality

Answer

A larger population

Question 39

Which element of Gross Domestic Product (GDP) is widely regarded as the primary driver of sustained economic growth?

Accepted Answer

High Investment

Answer

High Consumption

Answer

High Government Spending

Answer

High Net Exports

Question 40

How does inflation affect the difference between nominal GDP and real GDP?

Accepted Answer

Nominal GDP uses current prices, while real GDP uses constant base year prices to account for inflation.

Answer

Real GDP is always higher than nominal GDP because it considers inflation.

Answer

Nominal GDP is unaffected by inflation because it uses current prices.

Question 41

Which measure best represents the overall size and health of an economy?

Accepted Answer

Gross Domestic Product (GDP)

Answer

Unemployment Rate

Answer

Balance of Trade

Answer

Inflation Rate

Question 42

Which component is excluded when calculating GDP?

Accepted Answer

Government transfer payments

Answer

Consumer spending

Answer

Exports

Answer

Business investment

Question 43

How does GDP growth typically affect living standards?

Accepted Answer

Higher GDP growth often leads to improved living standards

Answer

Higher GDP growth can lower living standards

Answer

GDP growth has no effect on living standards

Question 44

Which factors can foster economic growth in a country?

Accepted Answer

Technological advancements, increased productivity, and foreign investment

Answer

Natural disasters and political instability

Answer

High unemployment and low wages

Question 45

**Which of the following is a key limitation of using Gross Domestic Product (GDP) as a measure of economic well-being?**

Accepted Answer

It does not account for income distribution or environmental impact

Answer

It is highly prone to manipulation and misinterpretation

Answer

It only includes goods and services produced formally

Question 46

**How can governments effectively use GDP data to inform their economic decision-making?**

Accepted Answer

To formulate fiscal and monetary policies, plan infrastructure investments, and efficiently allocate resources

Answer

To manipulate public opinion and influence elections

Answer

To justify tax increases and reduce welfare programs

Question 47

**Which of the following components is included in the calculation of GDP?**

Accepted Answer

The final value of all finished goods and services produced in a given period

Answer

The sale of existing assets

Answer

The value of goods imported from other countries

Question 48

**What is a key advantage of using GDP as a measure of economic growth?**

Accepted Answer

It provides a structured and comprehensive snapshot of economic activity within a specific period

Answer

It accurately captures changes in the quality of life

Answer

It can be easily manipulated by governments to misrepresent economic performance

Question 49

**The following formula (Y=C+I+G+NX) is used to calculate which aspect of GDP?**

Accepted Answer

Aggregate Expenditure

Answer

GDP per capita

Answer

Nominal GDP

Answer

Real GDP

Question 50

**Which of the following factors would most likely contribute to an increase in potential GDP?**

Accepted Answer

Investments in education, infrastructure, and technological advancements

Answer

Increased government borrowing

Answer

A decline in consumer confidence

Answer

A rise in inflation

Question 51

**What is the fundamental difference between nominal and real GDP?**

Accepted Answer

Nominal GDP includes the effect of inflation, while real GDP does not

Answer

Nominal GDP only includes goods, while real GDP includes both goods and services

Answer

Nominal GDP is measured using future prices, while real GDP is measured using historical prices

Question 52

**What is the general relationship between GDP and unemployment?**

Accepted Answer

An increase in GDP often leads to a decrease in unemployment

Answer

GDP and unemployment are not directly related

Answer

An increase in GDP always leads to an increase in unemployment

Question 53

Which of the following is a potential challenge to achieving sustainable economic growth?

Accepted Answer

Depletion of natural resources

Answer

Increased technological innovation

Answer

High levels of government spending