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Questions and Answers
Which of the following is NOT a factor measured by GDP?
Which of the following is NOT a factor measured by GDP?
- Underground economy
- Government spending (correct)
- Quality of life
- Nonmarket activities
Which of the following is NOT a requirement for calculating GDP?
Which of the following is NOT a requirement for calculating GDP?
- Goods and services must be sold within the time period, regardless of when they are produced (correct)
- GDP must include final goods and services, not intermediate goods
- Goods and services must be produced during the time period, regardless of when they are sold
- Goods and services must be produced within the nation's borders
Which of the following is the correct formula for calculating GDP?
Which of the following is the correct formula for calculating GDP?
- GDP = consumption + investment + government spending + net exports (correct)
- GDP = consumption - investment - government spending + net exports
- GDP = consumption - investment + government spending + net exports
- GDP = consumption + investment - government spending + net exports
Which of the following is the correct definition of nominal GDP?
Which of the following is the correct definition of nominal GDP?
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Which of the following is the correct definition of real GDP?
Which of the following is the correct definition of real GDP?
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Study Notes
GDP Measurement Factors
- GDP does not account for non-market transactions such as household labor and volunteer work.
- Environmental degradation and resource depletion are not included in GDP calculations, despite their economic implications.
GDP Calculation Requirements
- To calculate GDP, informal or underground economic activities are typically excluded.
- Accurate data on consumer spending, business investment, government spending, and net exports are essential but are gathered from a variety of sources.
GDP Calculation Formula
- The correct formula for calculating GDP is:
- GDP = C + I + G + (X - M)
- Where C = Consumption, I = Investment, G = Government spending, X = Exports, and M = Imports.
Nominal GDP Definition
- Nominal GDP measures the total value of all goods and services produced in a country at current market prices during a specific time period, without adjusting for inflation.
Real GDP Definition
- Real GDP adjusts nominal GDP for inflation, reflecting the true value of goods and services by using constant prices from a base year, providing a more accurate economic growth measure.
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