Q1. What is the difference between real GDP and nominal GDP?
Solution:
Real GDP is adjusted for inflation, while nominal GDP is measured at current prices without such adjustments.
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Q2. Which of the following components is part of the expenditure approach to calculating GDP?
Solution:
All of the above components—investment, net exports, and consumption—are part of the expenditure approach to calculating GDP.
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Q3. Which of the following is a limitation of GDP as a measure of national income?
Solution:
A limitation of GDP is that it does not account for income inequality, which can provide a misleading picture of economic well-being.
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Q4. Which of the following is NOT included in the calculation of national income?
Solution:
Government transfer payments, such as social security or unemployment benefits, are not included in national income as they do not reflect the production of goods and services.
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Q5. What is Gross Domestic Product (GDP)?
Solution:
Gross Domestic Product (GDP) measures the total value of all final goods and services produced within a country's borders in a specific time period.
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Q6. What is national income?
Solution:
National income refers to the total income earned by a country's residents, including wages, profits, rents, and taxes, minus subsidies.
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Q7. Which of the following is a limitation of national income statistics?
Solution:
National income statistics often do not account for income inequality, which can mask disparities in wealth distribution within a country.
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Q8. Which of the following is a component of national income?
Solution:
Consumer spending is a component of national income as it reflects the total expenditure on goods and services in the economy.
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Q9. Which method is commonly used to calculate national income?
Solution:
National income can be calculated using various methods, including the production method, income method, and expenditure method.
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Q10. What is the primary purpose of measuring national income?
Solution:
The primary purpose of measuring national income is to assess economic growth over time.
