CFA 17: Aggregate Output, Prices, &
Economic Growth
Which of the following statements is the most appropriate description of gross domestic
product (GDP)?
The total income earned by all households, firms, and the government whose value can
be verified.
The total amount spent on all final goods and services produced within the economy
over a given time period.
The total market value of resalable and final goods and services produced within the
economy over a given time period. correct answer- B is correct. GDP is the total amount
spent on all final goods and services produced within the economy over a specific
period of time.
The component least likely to be included in a measurement of gross domestic product
(GDP) is:
the value of owner occupied rent.
the annual salary of a local police officer.
environmental damage caused by production. correct answer- C is correct. By-products
of production processes that have no explicit market value are not included in GDP.
Which of the following conditions is least likely to increase a country's GDP?
An increase in net exports.
Increased investment in capital goods.
Increased government transfer payments. correct answer- C is correct. Government
transfer payments, such as unemployment compensation or welfare benefits, are
excluded from GDP.
Which of the following would be included in Canadian GDP for a given year? The
market value of:
wine grown in Canada by US citizens.
, electronics made in Japan and sold in Canada.
movies produced outside Canada by Canadian film makers. correct answer- A is
correct. Canadian GDP is the total market value of all final goods and services
produced in a given time period within Canada. The wine was produced in Canada and
counts towards Canadian GDP.
Suppose a painting is produced and sold in 2010 for £5,000. The expenses involved in
producing the painting amounted to £2,000. According to the sum-of-value-added
method of calculating GDP, the value added by the final step of creating the painting
was:
£2,000.
£3,000.
£5,000. correct answer- B is correct. This is the value added by the artist: £5,000 -
£2,000 = £3,000.
A GDP deflator less than 1 indicates that an economy has experienced:
inflation.
deflation.
stagflation. correct answer- B is correct. The GDP Deflator = Nominal GDP/Real GDP.
To get a ratio less than 1, real GDP exceeds nominal GDP, which indicates that prices
have decreased and, accordingly, deflation has occurred.
The most accurate description of nominal GDP is:
a measure of total expenditures at current prices.
the value of goods and services at constant prices.
a measure to compare one nation's economy to another. correct answer- A is correct.
Nominal GDP is defined as the value of goods and services measured at current prices.
Expenditure is used synonymously with the value of goods and services since
aggregate expenditures must equal aggregate output of an economy.
From the beginning to the ending years of a decade, the annual value of final goods and
services for country X increased from €100 billion to €300 billion. Over that time period,
the GDP deflator increased from 111 to 200. Over the decade, real GDP for country X
increased by approximately:
50%.
Economic Growth
Which of the following statements is the most appropriate description of gross domestic
product (GDP)?
The total income earned by all households, firms, and the government whose value can
be verified.
The total amount spent on all final goods and services produced within the economy
over a given time period.
The total market value of resalable and final goods and services produced within the
economy over a given time period. correct answer- B is correct. GDP is the total amount
spent on all final goods and services produced within the economy over a specific
period of time.
The component least likely to be included in a measurement of gross domestic product
(GDP) is:
the value of owner occupied rent.
the annual salary of a local police officer.
environmental damage caused by production. correct answer- C is correct. By-products
of production processes that have no explicit market value are not included in GDP.
Which of the following conditions is least likely to increase a country's GDP?
An increase in net exports.
Increased investment in capital goods.
Increased government transfer payments. correct answer- C is correct. Government
transfer payments, such as unemployment compensation or welfare benefits, are
excluded from GDP.
Which of the following would be included in Canadian GDP for a given year? The
market value of:
wine grown in Canada by US citizens.
, electronics made in Japan and sold in Canada.
movies produced outside Canada by Canadian film makers. correct answer- A is
correct. Canadian GDP is the total market value of all final goods and services
produced in a given time period within Canada. The wine was produced in Canada and
counts towards Canadian GDP.
Suppose a painting is produced and sold in 2010 for £5,000. The expenses involved in
producing the painting amounted to £2,000. According to the sum-of-value-added
method of calculating GDP, the value added by the final step of creating the painting
was:
£2,000.
£3,000.
£5,000. correct answer- B is correct. This is the value added by the artist: £5,000 -
£2,000 = £3,000.
A GDP deflator less than 1 indicates that an economy has experienced:
inflation.
deflation.
stagflation. correct answer- B is correct. The GDP Deflator = Nominal GDP/Real GDP.
To get a ratio less than 1, real GDP exceeds nominal GDP, which indicates that prices
have decreased and, accordingly, deflation has occurred.
The most accurate description of nominal GDP is:
a measure of total expenditures at current prices.
the value of goods and services at constant prices.
a measure to compare one nation's economy to another. correct answer- A is correct.
Nominal GDP is defined as the value of goods and services measured at current prices.
Expenditure is used synonymously with the value of goods and services since
aggregate expenditures must equal aggregate output of an economy.
From the beginning to the ending years of a decade, the annual value of final goods and
services for country X increased from €100 billion to €300 billion. Over that time period,
the GDP deflator increased from 111 to 200. Over the decade, real GDP for country X
increased by approximately:
50%.
