Measuring A Nation's Income

Question 1

What is Microeconomics

Answer 1

Microeconomics is the study of individuals, households, and firms’ behaviour in decision making and allocation of resources.

Question 2

What is Macroeconomics

Answer 2

Macroeconomics is the branch of economics that studies the behaviour and performance of an economy as a whole.

Question 3

What is GDP (Gross Domestic Product)

Answer 3

GDP isthe standard measure of the value added to the production of goods and services in a country during a certain period.

Question 4

For an economy as a whole, income must equal expenditure.
A. True
B. False

Answer 4

True

Question 5

GDP is a measure of both aggregate demand and aggregate income generated within a country during a period of time.
A. True
B. False

Question 6

Households are buyers, and firms are sellers in the markets for goods and services.
A. True
B. False

Answer 6

True

Question 7

Firms are buyers and households are sellers in the markets for the factors of production.
A. True
B. False

Answer 7

True

Question 8

Households buy goods and services from firms, and firms use revenue from sales to pay wages to workers, rent to landowners, and profit to firm owners.
A. True
B. False

Answer 8

True

Question 9

GDP equals the total amount spent by households in the market for goods and services.
A. True
B. False

Answer 9

True

Question 10

Goods and services sold to foreign countries are exports. Goods and services purchased from a buyer’s domestic market of foreign manufactured goods are imports.
A. True
B. False

Answer 10

True

Question 11

What two things does GDP measure

Answer 11

GDP can measure two things at once because they are two sides of the same coin. When a good or service is produced and sold, it generates income for someone(either the producer, the workers, or the owners of the company. So, adding up the value of all goods and services produced, it is also measuring the total income earned.

Question 12

The components of GDP are Y = C + I +G + NX
A. True
B. False

Answer 12

True

Question 13

What are the four components of expenditure

Answer 13

1. Consumption
2. Government spending
3. Investment
4. Net exports

Question 14

What does it mean when net exports have a negative value

Answer 14

When net exports have a negative value, it means a country’s total value of exports is less than its total value of imports.

Question 15

Nominal gdp is the production of goods and services valued at current prices.
A. True
B. False

Answer 15

True

Question 16

Real gdp is the production of goods and services valued at constant prices.
A. True
B. False

Answer 16

True

Question 17

What is Real GDP

Answer 17

Real GDP is the total value of all final goods and services in the economy during a given year, calculated using the prices of a selected base year.

Question 18

Real GDP is expressed in base-year prices.
A. True
B. False

Answer 18

True

Question 19

What is a GDP Deflator

Answer 19

The GDP deflator is a tool that measures the gross domestic product (GDP) affected by the change in the price of the products and goods rather than the output of an economy.

Question 20

GDP Deflator is a measure of the price level calculated as the ratio of nominal gdp to real gdp times 100
A. True
B. False

Answer 20

True

Question 21

The GDP Deflator formula = Nominal gdp/Real gdp x 100
A. True
B. False

Answer 21

True

Question 22

What is inflation

Answer 22

Inflation is the rate of an increase in prices of goods over a given period of time in the economy.

Question 23

What is Nominal GDP

Answer 23

Nominal GDP is the value of all final goods and services produced in the economy during a given year, calculated using the current prices in the year in which the output is produced.

Question 24

What is an Inflation rate

Answer 24

The inflation rate is the per cent change per year in a price index, typically the consumer price index.

Question 25

Why should policymakers care about GDP?

Answer 25

Policymakers should care about GDP because it is a key dictator of the economic health of a country. It is often used as a measure of standard of living, and it informs policy decisions.