3.1 Measuring economic activity

 Which of the following is not an injection into the circular flow of income?

• Investment

• Exports

• Tax

• Government expenditure

Which of the following is not an effect of a rise in savings by households?

• Consumption expenditure falls

• Withdrawals from the circular flow of income increase

• Household incomes rise

• Economic growth slows

Answer explanation

Household incomes are likely to fall if more funds are withdrawn from the circular flow.

Which of the following is the best definition of GDP?

• A. A country’s GDP is the money value of all final goods and services produced by that country in one year.

• A country’s GDP is the money value of all final goods and services produced by that country in one year less imports.

• A country’s GDP is the total amount of all final goods and services produced by that country in one year.

• A country’s GDP is the money value of all goods and services produced by that country in one year

Answer explanation

The key points are the money value of output and final goods and services.

4

Using the following data of country A, which of the following values is the real GDP of country A?

Nominal GDP $1,200 billion

GDP deflator 98

• $1225 Billion

• 1176 Billion

• 1177 Billion

• 1276 Billion

Answer explanation

$1,200 / 98 x 100 = $1225 Billion

Which of the following best represents the changes in GDP during the business cycle?

• boom – recession – recovery – slowdown

• boom – recovery – slowdown - recession

• boom – recovery – slowdown – recession

• boom – slowdown – recession – recovery

Which of the following is not a property outflow from Country X?

• Rent on property paid to an overseas owner

• Dividends paid to overseas shareholders

• Funds paid on imported goods to a foreign business

• Profits made by a foreign-owned business and sent back to its home country

Answer explanation

Imports are not income generated from foreign assets owned in the domestic economy.

Which of the following is least likely to occur in the recession phase of the business cycle?

• Rising unemployment

• .Falling inflation

• Rising levels of consumer spending

• Falling incomes

Answer explanation

Consumer spending is most likely to fall in a recession.

This is the following data is for Country X:

Nominal GDP $3,000 million

GDP deflator 97

Which of the following is the real GDP for Country X?

• $3,0933 million

• $3,093 million

• $3,092 million

• $3,3293 million

Answer explanation

$3,000 / 0.97 = $3,093 million

This is economic data for Country Y:

Real GDP 2021 $14,500 million

Real GDP 2020 $14,350 million

Which of the following is Country Y’s rate of economic growth for 2021?

• 5.00%

• 1.03%

• 3.00%

• 1.05%

Using the following data of country B, which of the following values is the real GNI of country B?

Real GDP $780 Billion

Property inflow $18 Billion

Property outflow $21 Billion

• $783B

• $798B

• $777B

• $898B