GDP Concept and Indicators 3

Question 1

Which of the following transactions IS included in GDP?

Accepted Answer

A builder constructing a new home for sale

Answer

New residential construction is investment (I) in the expenditure approach; used goods, financial assets, and transfer payments are excluded.

Question 2

When the BEA releases its 'advance' GDP estimate, it is based on:

Accepted Answer

Roughly two-thirds of the data, with estimates filling the rest

Answer

The advance estimate uses about two-thirds of available source data and is revised in subsequent 'second' and 'third' releases.

Question 3

Which component of GDP is typically the MOST VOLATILE over the business cycle?

Accepted Answer

Business investment (I)

Answer

Business investment in equipment, structures, and inventories swings sharply with economic confidence and credit conditions.

Question 4

GNP differs from GDP in that GNP:

Accepted Answer

Adds income earned by residents abroad and subtracts income earned domestically by foreigners

Answer

GNP = GDP + income earned by U.S. residents abroad − income earned in the U.S. by foreign residents.

Question 5

A country's nominal GDP rose 8% while its price level rose 5%. Approximately what was real GDP growth?

Accepted Answer

3%

Answer

Real GDP growth ≈ Nominal GDP growth − Inflation rate = 8% − 5% = 3%.

GDP - Gross Domestic Product Practice Test