Eco Review

What is Gross Domestic Product (GDP)?

• The total market value of all final goods and services produced within a country in a specific period.

• The total amount of money in circulation in a country's economy.

• The value of all goods produced by a country's citizens anywhere in the world.

• The total value of a country's exports in a given year.

Which of the following would be counted in the U.S. GDP for 2024?

• A new car produced in a U.S. factory in 2024.

• Steel sold to a car manufacturer in Detroit (used to build cars).

• A used laptop sold online in 2024 that was originally made in 2022.

• The output of a U.S. company's factory located in China.

In the United States, which component typically makes up the largest portion of GDP?

• Business investment.

• Net exports (exports minus imports).

• Government spending.

• Consumer spending (household consumption).

What is the key difference between nominal GDP and real GDP?

• Nominal GDP is measured per person, while real GDP measures total output.

• Real GDP only counts government spending and nominal GDP counts all spending.

• Real GDP is adjusted for inflation, whereas nominal GDP is not.

• Nominal GDP includes the value of services, while real GDP does not.

If a country has a trade deficit (imports more than it exports), how does this directly affect GDP?

• It only affects GDP if the government changes tax rates.

• It has no effect on GDP, as imports and exports are excluded.

• It increases GDP, since imports add to domestic consumption.

• It reduces GDP, since net exports would be negative.

What does GDP per capita represent?

• The total GDP of a country divided by its total exports.

• GDP adjusted for inflation and purchasing power.

• The average economic output per person in a country.

• The portion of GDP that comes from consumer spending.

Which of the following is NOT accounted for in a country's GDP?

• Income inequality or how income is distributed among citizens.

• The total value of goods and services produced within the country.

• Government expenditures on public services.

• Changes in company inventory levels during the year.

Why do governments collect taxes?

• To fund public services and government operations (like infrastructure, education, defense).

• To punish individuals for earning too much money.

• To discourage people from keeping savings in banks.

• To intentionally increase the cost of living for citizens.

Which of the following is an example of a progressive tax system?

• The U.S. federal income tax, where higher incomes are taxed at higher rates.

• A sales tax that charges the same rate on all purchases.

• A flat tax where everyone pays 10% of their income.

• A fixed per-person tax that everyone pays equally.

Why are sales taxes often considered a regressive form of taxation?

• They take a larger percentage of income from low-income individuals than from high-income individuals.

• They charge higher tax rates on luxury goods than on necessities.

• They apply only to people with higher incomes.

• They increase as a person's income increases.