National Income and Output: A Comprehensive Guide for High School Seniors

Question 1

The circular flow of income model demonstrates the flow of income and spending within an economy. Which of these sectors is NOT directly involved in this flow?

Accepted Answer

Foreign nations

Answer

Households

Answer

Businesses

Answer

Government

Question 2

Which factor would result in an increase in real GDP?

Accepted Answer

Technological advancements

Answer

Inflation

Answer

Changes in price levels

Answer

Decrease in government spending

Question 3

Which scenario would result in a negative value for net exports when calculating GDP?

Accepted Answer

Imports exceeding exports

Answer

Exports exceeding imports

Answer

A balanced trade situation

Answer

An increase in domestic production

Question 4

In national income, 'equilibrium' refers to a situation where:

Accepted Answer

Total spending equals total income

Answer

Inflation is at its lowest level

Answer

Unemployment is zero

Answer

Economic growth is stagnant

Question 5

The total value of all final goods and services produced in an economy during a specific period is known as:

Accepted Answer

Gross Domestic Product

Answer

Gross National Income

Answer

Net National Income

Answer

National Income

Question 6

What is the difference between real GDP and nominal GDP?

Accepted Answer

Real GDP is adjusted for inflation, while nominal GDP is not.

Answer

Nominal GDP is adjusted for inflation, while real GDP is not.

Answer

They are both adjusted for inflation.

Answer

They are not different.

Question 7

What is the circular flow of income model?

Accepted Answer

A graphical representation of the flow of income and spending in an economy.

Answer

A mathematical equation that calculates GDP.

Answer

A theory that explains the causes of inflation.

Answer

A model that predicts economic growth.

Question 8

What is the difference between GDP and GNP?

Accepted Answer

GDP measures the income of all residents in a country, while GNP measures the income of all citizens of a country.

Answer

GNP measures the income of all residents in a country, while GDP measures the income of all citizens of a country.

Answer

They are the same concept.

Answer

They are completely different concepts.

Question 9

Which of these is **NOT** a component of Gross Domestic Product (GDP)?

Accepted Answer

Financial transactions

Answer

Consumption spending

Answer

Government spending

Answer

Net exports

Question 10

Which action would result in an expansion of the circular flow of income?

Accepted Answer

An increase in consumer spending

Answer

A decrease in government spending

Answer

An increase in private savings

Answer

A reduction in business investments

Question 11

What is the primary aim of calculating GDP?

Accepted Answer

To measure the total market value of all finished goods and services produced within an economy

Answer

To track the performance of specific businesses over time

Answer

To evaluate the income distribution of households

Answer

To assess the overall well-being of citizens

Question 12

Which factor may contribute to an economic recession?

Accepted Answer

Falling stock prices

Answer

Rising consumer confidence

Answer

Decreasing interest rates

Answer

Growing exports

Question 13

How does inflation impact GDP?

Accepted Answer

In the short term, inflation can boost GDP but hinder it in the long term.

Answer

In the short term, inflation can reduce GDP but promote it in the long term.

Answer

Inflation generally has no significant impact on GDP.

Answer

Inflation leads to increased stability and predictability in GDP.

Question 14

Why is GDP a commonly accepted measure of economic growth?

Accepted Answer

It is a widely used standard, enabling international economic comparisons.

Answer

It accurately captures the economic well-being and prosperity of a nation.

Answer

It effectively eliminates the impact of inflation and market fluctuations.

Answer

It does not require extensive data collection, making it easy to obtain.

Question 15

Which of the following is NOT included in the calculation of Gross Domestic Product (GDP)?

Accepted Answer

Personal saving

Answer

Consumption

Answer

Investment

Answer

Government spending

Question 16

Which of the following is an example of a transfer payment?

Accepted Answer

Social Security benefits

Answer

Wages earned from employment

Answer

Interest earned on bonds

Answer

Rent paid on a property

Question 17

What is the formula used to calculate nominal GDP?

Accepted Answer

Nominal GDP = Price level x Real GDP

Answer

Nominal GDP = Real GDP / Price level

Answer

Nominal GDP = Price level + Real GDP

Answer

Nominal GDP = Real GDP - Price level

Question 18

Which component is NOT a part of GDP?

Accepted Answer

Exports - Imports

Answer

Consumption expenditure

Answer

Government spending

Answer

Investment expenditure

Question 19

Which of the following factors does NOT influence nominal GDP?

Accepted Answer

Changes in technology

Answer

Changes in price levels

Answer

Changes in output quantity

Answer

Changes in exchange rates for international transactions

Question 20

The difference between nominal GDP and real GDP is primarily due to:

Accepted Answer

Inflation

Answer

Deflation

Answer

Government spending

Answer

Net exports

Question 21

If the government of the United States increases its spending by $1 trillion, what will be the immediate impact on GDP?

Accepted Answer

Increase by $1 trillion

Answer

Decrease by $1 trillion

Answer

Remain unchanged

Answer

Cannot be determined

Question 22

The idea of 'externalities' refers to:

Accepted Answer

Costs or benefits that are not reflected in market prices

Answer

Government regulations influencing the economy

Answer

Production and consumption activities outside the market

Answer

Natural disasters impacting the economy

Question 23

Which economic philosophy advocates for minimum government intervention and promotes individual economic freedom?

Accepted Answer

Laissez-faire

Answer

Keynesianism

Answer

Monetarism

Answer

Marxism

Question 24

Which of the following factors **would NOT** lead to an increase in GDP?

Accepted Answer

A decrease in government spending

Answer

An increase in consumer spending

Answer

A rise in business investment

Answer

A growth in net exports

Question 25

What is the **purpose** of the circular flow of income?

Accepted Answer

To illustrate the flow of money, goods, and services within an economy.

Answer

To show how businesses interact with consumers.

Answer

To explain how government spending affects the economy.

Answer

To measure the total output of an economy.

Question 26

Which of the following is **not** a type of macroeconomic policy?

Accepted Answer

Environmental policy

Answer

Fiscal policy

Answer

Monetary policy

Answer

Trade policy

Question 27

When real GDP is **lower** than potential GDP, this situation is known as a:

Accepted Answer

Recessionary gap

Answer

Expansionary gap

Answer

Budget deficit

Question 28

Improved: Which component is excluded from the Gross Domestic Product (GDP)?

Accepted Answer

Imports

Answer

Consumption

Answer

Investment

Answer

Government spending

Question 29

Improved: What is the distinction between real GDP and nominal GDP?

Accepted Answer

Real GDP measures output using constant prices, while nominal GDP measures output using **current** prices.

Answer

Nominal GDP measures output using constant prices, while real GDP measures output using **current** prices.

Answer

Real GDP and nominal GDP represent the **same** concept.

Answer

Real GDP measures output using **future** prices, while nominal GDP measures output using current prices.

Question 30

Improved: Define the circular flow of income.

Accepted Answer

A model illustrating the **flow of money** throughout an economy.

Answer

A theory explaining how governments collect **taxes**.

Answer

A concept describing how businesses generate **profits**.

Answer

A model predicting the future direction of the **stock market**.

Question 31

Improved: What is an advantage of using GDP per capita as a measure of economic well-being?

Accepted Answer

It accounts for differences in **population size**.

Answer

It measures the **distribution of income**.

Answer

It is not affected by **inflation**.

Answer

It can be used to compare countries with **different currencies**.

Question 32

Improved: What is the difference between nominal income and real income?

Accepted Answer

Nominal income is measured in **current dollars**, while real income is measured in **constant dollars**.

Answer

Real income is measured in **current dollars**, while nominal income is measured in **constant dollars**.

Answer

Nominal income and real income are the **same**.

Answer

Nominal income is measured in **future dollars**, while real income is measured in current dollars.

Question 33

Improved: How is GDP calculated using the expenditure approach?

Accepted Answer

By totaling all **spending** on goods and services in the economy.

Answer

By totaling all **income** earned by households and businesses in the economy.

Answer

By totaling all **profits** earned by businesses in the economy.

Answer

By totaling all **taxes** collected by the government in the economy.

Question 34

What is the primary distinction between real GDP and nominal GDP?

Accepted Answer

Real GDP adjusts for inflation, while nominal GDP does not.

Answer

Real GDP measures output using current prices, while nominal GDP uses base year prices.

Answer

Nominal GDP includes all market transactions, while real GDP only includes transactions above a certain value.

Answer

Real GDP is adjusted for population growth, while nominal GDP is not.

Question 35

What is the primary reason for calculating GDP per capita?

Accepted Answer

To compare economic well-being across countries

Answer

To predict long-term economic growth

Answer

To measure a country's total output

Answer

To determine the income distribution within a country

Question 36

Which economic indicator shares the closest relationship with GDP?

Accepted Answer

Unemployment rate

Answer

Inflation rate

Answer

Consumer Price Index

Answer

Dow Jones Industrial Average

Question 37

What is the primary purpose of using a base year in GDP accounting?

Accepted Answer

To enable comparisons of GDP over time

Answer

To account for variations in inflation

Answer

To simplify calculations

Answer

To prevent double counting

Question 38

What is the relationship between GDP growth and economic development?

Accepted Answer

While GDP growth is a necessary condition for economic development, it is not sufficient.

Answer

While economic development is a necessary condition for GDP growth, it is not sufficient.

Answer

GDP growth and economic development are always positively correlated.

Answer

GDP growth and economic development are unrelated concepts.

Question 39

What is the primary purpose of incorporating depreciation into GDP calculations?

Accepted Answer

To account for the value reduction of capital goods over time

Answer

To adjust for changes in the price level

Answer

To prevent double counting of investment spending

Answer

To discourage businesses from investing in new capital

Question 40

The main difference between real GDP and nominal GDP is that:

Accepted Answer

Real GDP excludes the effects of inflation, while nominal GDP includes them.

Answer

Real GDP includes the effects of inflation, while nominal GDP excludes them.

Answer

Real GDP measures the value of goods produced in a year, while nominal GDP measures the value over time.

Answer

Nominal GDP measures the value of goods produced in a year, while real GDP measures the value over time.

Question 41

Which of these is a measure used to determine economic growth?

Accepted Answer

Real GDP growth rate

Answer

Inflation rate

Answer

Unemployment rate

Answer

Consumer Price Index

Question 42

Which of these is NOT a component of investment spending?

Accepted Answer

Government spending on infrastructure

Answer

New construction of buildings

Answer

Purchase of new machinery for businesses

Answer

Changes in business inventories

Question 43

The multiplier effect refers to the concept that:

Accepted Answer

An initial increase in spending will lead to a greater increase in GDP

Answer

An initial decrease in spending will lead to a larger decrease in GDP

Answer

The multiplier is always equal to 1

Answer

The multiplier is always greater than 1

Question 44

Which of the following is NOT a component of GDP?

Accepted Answer

Net imports

Answer

Consumer spending

Answer

Government spending

Answer

Investment

Question 45

Which of the following is NOT a factor of production?

Accepted Answer

Technology

Answer

Land

Answer

Labor

Answer

Capital

Question 46

What is the purpose of the circular flow of income?

Accepted Answer

To demonstrate the flow of money through the economy.

Answer

To demonstrate the flow of goods and services through the economy.

Answer

To illustrate how the government interacts with the economy.

Answer

To show how the factors of production are used to produce goods and services.

Question 47

What is the main difference between GDP and GNP?

Accepted Answer

GDP includes the goods and services produced within a country's borders, while GNP includes the goods and services produced by a country's residents.

Answer

GNP includes the goods and services produced within a country's borders, while GDP includes the goods and services produced by a country's residents.

Answer

GDP is a measure of a country's total output, while GNP is a measure of a country's income.

Answer

GNP is a measure of a country's total output, while GDP is a measure of a country's income.

Question 48

What is the impact of an increase in government spending on GDP?

Accepted Answer

It will increase GDP in both the short run and the long run.

Answer

It will increase GDP in the short run, but decrease GDP in the long run.

Answer

It will increase GDP in the long run, but decrease GDP in the short run.

Answer

It will decrease GDP in both the short run and the long run.

Question 49

What is the purpose of the Phillips Curve?

Accepted Answer

To illustrate the relationship between inflation and unemployment

Answer

To illustrate the relationship between economic growth and unemployment

Answer

To illustrate the relationship between interest rates and inflation

Answer

To illustrate the relationship between productivity and wages

Question 50

What is the main goal of monetary policy?

Accepted Answer

To stabilize prices

Answer

To promote economic growth

Answer

To reduce unemployment

Answer

To redistribute income more evenly