Free GDP Concept and Indicators Questions and Answers — Questions and Answers
Question 1: Which of the following is not a method to calculate Gross Domestic Product?
- Diminishing cost method (Correct answer)
- Expenditure method
- Product method
- None of the above
Correct answer: Diminishing cost method
"Explanation: <br> The correct answer is "Diminishing cost method" because it's not a recognized method for calculating GDP."
Question 2: Which of the following is a part of the Gross National Product (GNP)?
- Exports
- Money earned by a resident abroad
- Imports
- All of the above (Correct answer)
Correct answer: All of the above
Explanation: <br> Gross National Product (GNP) includes exports, imports, and the money earned by a country's residents abroad.
Question 3: The net value of Gross Domestic Product after deducting depreciation from it is _______.
- Net Domestic Product (Correct answer)
- Net National Product
- Disposable Income
- Gross National Product
Correct answer: Net Domestic Product
Explanation: <br> Net Domestic Product (NDP) is the net value of Gross Domestic Product (GDP) after deducting depreciation from it. It reflects the value of goods and services produced within a country's borders after accounting for the depreciation of capital goods.
Question 4: The average income of a country is known as _________.
- Real National Income
- Per Capita Income (Correct answer)
- Disposable Income
- None of the above
Correct answer: Per Capita Income
Explanation: <br> Per Capita Income refers to the average income earned per person in a given area, such as a country or region. It is calculated by dividing the total income of a country by its total population.
Question 5: Transfer payments refer to payments that are made ________.
- As compensation to employees
- Without any exchange of goods and services (Correct answer)
- To workers on transfer from one job to another
- None of the above
Correct answer: Without any exchange of goods and services
Explanation: <br> Transfer payments are payments made by the government to individuals, businesses, or other levels of government without receiving any goods or services in return. They are typically made for social welfare programs, subsidies, or other forms of assistance.
Question 6: Which sector in the economy is the largest contributor to the Gross National Product?
- Tertiary sector (Correct answer)
- Public sector
- Primary sector
- Secondary sector
Correct answer: Tertiary sector
Explanation: <br> The tertiary sector, also known as the service sector, includes industries such as retail, banking, transportation, education, and healthcare. It is often the largest contributor to the Gross National Product (GNP) in many modern economies, reflecting the importance of services in economic activity and growth.
Question 7: Which of the following is a limitation of the Gross Domestic Product?
- It fails to indicate the sustainability of a nation’s growth
- It doesn’t consider the impact of economic activities on human health and the environment
- It does not include non-market transactions
- All of the above (Correct answer)
Correct answer: All of the above
Explanation: <br> Each of the options listed represents a limitation of the Gross Domestic Product (GDP). While GDP is a widely used measure of economic activity, it does have limitations. It doesn't account for factors like the sustainability of growth, the impact on human health and the environment, and non-market transactions, which can provide an incomplete picture of a nation's overall well-being and economic health.
Question 8: The total income from economic activities across the country within a year is known as ________.
- National Income (Correct answer)
- Disposable Income
- Net Income
- None of the above
Correct answer: National Income
Explanation: <br> National Income refers to the total income earned by residents of a country from various economic activities within a specified period, typically a year.
Question 9: Which of the following statements is true about Nominal Gross Domestic Product?
- It shows a more accurate picture of a country’s economy as compared to real GDP
- It is calculated by considering the current prices (Correct answer)
- It is calculated by considering the base prices
- None of the above
Correct answer: It is calculated by considering the current prices
Explanation: <br> Nominal Gross Domestic Product (GDP) is calculated by considering the current prices of goods and services without adjusting for inflation.
Question 10: Which of the following is added in calculating Gross Domestic Product?
- A teacher teaching their child
- The value of resale of old shares
- An artisan constructing a new house (Correct answer)
- None of the above
Correct answer: An artisan constructing a new house
Explanation: <br> The construction of a new house adds value to the economy and is included in the calculation of Gross Domestic Product (GDP).
Question 11: While using expenditure to calculate Gross Domestic Product, consumption ___________.
- Includes consumer spending on durable and non-durable goods as well as services (Correct answer)
- Includes consumer spending on durable and non-durable goods but excludes services
- Includes purchases by business firms
- None of the above
Correct answer: Includes consumer spending on durable and non-durable goods as well as services
Explanation: <br> When using expenditure to calculate Gross Domestic Product (GDP), consumption includes spending on durable goods (like cars and appliances), non-durable goods (like food and clothing), and services (like healthcare and entertainment).
Free GDP Concept and Indicators Questions and Answers
Which of the following is not a method to calculate Gross Domestic Product?