Intro to GDP: Test of Understanding

Why are intermediate goods not counted in GDP?

• 1. We don’t have a way to count them, but if we did we should include them.

• The value of intermediate goods is negligible.

• The value of intermediate goods is reflected in the price of the finished good, and we want to avoid double-counting.

• 1. Intermediate goods ARE counted in GDP.

Which of the following would NOT be included in U.S. GDP?

• 1. Wheat grown in Nebraska sold to China.

• An iPhone manufactured in China sold in NYC.

• 1. A US made tractor sold to a farmer in PA for use on his commercial farm.

• Eggs purchased at the grocery store for your brother to make scrambled eggs.

1. When calculating GDP, imports:

• 1. Always decrease net GDP.

• Sometimes decrease net GDP.

• 1. Have no effect on net GDP.

• 1. Increase net GDP.

A country’s real GDP ________________ than its real GDP per capita.

• 1. Is always larger

• 1. Is always smaller

• Can be larger or smaller

If a country’s real GDP per capita is 2,000 and it’s population is 10, what is its real GDP?

• 100

• 200

• 10,000

• 20,000

If country A’s nominal GDP is 50,000 and country B’s nominal GDP is 100,000, which is the richer country?

• Country A

• Country B

• 1. Cannot tell with the current information.

GDP per capita can be used to compare living standards across countries because:

• GDP per capita data includes healthcare outcomes.

• GDP per capita data is correlated with other measures of well-being that we care about like life expectancy, literacy, and happiness.

• 1. GDP per capita can tell you exactly how much every person in a country owns.

• 1. GDP per capita CANNOT tell you anything about living standards.

1. One weakness of using real GDP per capita as a standard of living measure is that:

• 1. Real GDP per capita doesn’t control for population size differences.

• 1. Real GDP per capita doesn’t control for income distribution differences.

• Real GDP per capita doesn’t control for differences in prices.

• All the other three answers are correct