GDP Calculation Methods 4

Question 1

The GDP deflator differs from CPI primarily because the GDP deflator:

Accepted Answer

Covers all goods and services in GDP, not just consumer goods

Answer

The GDP deflator reflects price changes for all domestically produced goods and services, while CPI only tracks a fixed basket of consumer goods.

Question 2

A country produces only cars worth $30,000 each. In year 1, it makes 100 cars at $30,000; in year 2, it makes 110 cars at $33,000. What is real GDP growth from year 1 to year 2?

Accepted Answer

10%

Answer

Real GDP growth measures only the quantity change: 110 vs. 100 cars = 10% growth, holding prices constant.

Question 3

In the income approach to GDP, 'mixed income' typically refers to:

Accepted Answer

Income of self-employed individuals that blends labor and capital returns

Answer

Mixed income is earned by the self-employed and unincorporated enterprises, where it is difficult to separate returns to labor from returns to capital.

Question 4

Statistical discrepancy in GDP accounts arises because:

Accepted Answer

The expenditure, income, and output approaches use different data sources and may not align perfectly

Answer

The three GDP approaches should theoretically yield identical results, but data collection imperfections cause small differences requiring a statistical discrepancy adjustment.

Question 5

Which best describes 'chain-weighting' used in U.S. real GDP calculations?

Accepted Answer

Weighting each good's price change by its GDP share in consecutive years

Answer

Chain-weighting updates the price weights used to compute real GDP each year, reducing the substitution bias present in fixed-base-year methods.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP Calculation Methods 4