GDP Real vs. Nominal GDP 3

Question 1

In the United States, which agency is primarily responsible for publishing official GDP estimates including real GDP?

Accepted Answer

Bureau of Economic Analysis (BEA)

Answer

The BEA, part of the Department of Commerce, produces the official National Income and Product Accounts including real and nominal GDP.

Question 2

The chain-weighting method used by the BEA to calculate real GDP differs from a fixed-base-year approach because it:

Accepted Answer

Updates price weights continuously rather than anchoring to one year

Answer

Chain-weighting uses adjacent-year price weights averaged together, avoiding the substitution bias of a fixed base year.

Question 3

If the BEA shifts the base year for real GDP from 2012 to 2017, which of the following is true?

Accepted Answer

The growth rates of real GDP remain largely unchanged even though the level differs

Answer

Changing the base year rescales GDP levels but does not materially alter the growth rates that economists rely on for analysis.

Question 4

A country produces only apples. In 2020 (base year) it produces 100 apples at $1 each. In 2025 it produces 120 apples at $1.50 each. What is real GDP in 2025?

Accepted Answer

$120

Answer

Real GDP uses base-year prices: 120 apples × $1 (2020 price) = $120.

Question 5

An economy's nominal GDP doubles over a decade while its real GDP increases by only 40%. The most accurate conclusion is:

Accepted Answer

About 60 percentage points of nominal growth was due to inflation

Answer

The gap between 100% nominal growth and 40% real growth indicates roughly 60 percentage points was driven by rising price levels.

GDP - Gross Domestic Product Practice Test

GDP - Gross Domestic Product Practice Test

GDP Real vs. Nominal GDP 3