CEA Macroeconomic Indicators 4

Question 1

Which component is NOT included in the expenditure approach to measuring GDP?

Accepted Answer

Government transfer payments

Answer

Transfer payments (e.g., Social Security) are not payments for current production and are excluded from GDP expenditure calculations.

Question 2

A country's terms of trade improve when:

Accepted Answer

Export prices rise faster than import prices

Answer

Terms of trade = export price index / import price index; an increase means each unit of exports buys more imports.

Question 3

In measuring inflation, hedonic quality adjustments are intended to correct for:

Accepted Answer

Quality improvements embedded in price changes

Answer

Hedonic adjustment isolates the pure price change from any change in product quality so that better products don't artificially inflate the CPI.

Question 4

Which measure of money supply includes savings deposits, small time deposits, and retail money market funds?

Accepted Answer

M2

Answer

M2 adds less liquid assets—savings accounts, small CDs, and retail money market funds—to the narrower M1 definition.

Question 5

Seasonal adjustment of economic data is performed primarily to:

Accepted Answer

Isolate the underlying trend by removing predictable calendar patterns

Answer

Seasonal adjustment strips out recurring calendar-driven fluctuations so analysts can identify genuine cyclical or trend changes.

(CEA) Certified Economic Analyst Practice Test