ECO 205 - Quiz 01

1.What is the most common measure of a country’s standard of living?

• A. Inflation rate

• B. GDP per capita

• C. Unemployment rate

• D. Balance of trade

2.What is the difference between nominal GDP and real GDP?

• A. Nominal GDP adjusts for inflation, real GDP does not.

• B. Real GDP measures profit, nominal GDP measures revenue.

• C. Nominal GDP measures domestic income, real GDP measures foreign income.

• D. Real GDP adjusts for inflation, nominal GDP does not.

3. 3.Which of the following is an example of investment in GDP?

• A. A consumer buying groceries

• B. A factory buying new machinery

• C. A government paying salaries to teachers

• D. An individual purchasing stocks

4. A farmer sells wheat to a bakery for $500. The bakery sells bread made from this wheat for $1,000. What is added to GDP?

• A. $500

• B. $0

• C. $1,500

• D. $1,000

5. If a country’s GDP rises while its GDP per capita falls, what might explain this?

• A. Population growth exceeded GDP growth.

• B. Inflation increased sharply.

• C. Exports declined significantly.

• D. Investment increased.

6. How does an increase in government spending on healthcare affect GDP in the short run?

• A. Increases GDP through consumption

• B. Increases GDP through investment

• C. Increases GDP through government spending

• D. Decreases GDP through taxation

7. Which of the following is a valid criticism of using GDP as a measure of national well-being?

• A. It ignores income inequality and distribution.

• B. It includes environmental degradation in its calculations.

• C. It perfectly captures economic well-being.

• D. It measures non-market transactions accurately.

8. If a large part of a country’s workforce shifts from formal employment to informal employment, what is the likely effect on GDP?

• A. GDP will increase.

• B. GDP will remain unchanged.

• C. GDP will decrease.

• D. Inflation will decrease.

9. If exports exceed imports, a country has:

• A. A budget deficit

• B. A trade surplus

• C. A trade deficit

• D. No change in GDP

10. Which of the following best evaluates the importance of including non-market activities (e.g., household work) in GDP calculations?

• A. Including them would complicate GDP calculations unnecessarily.

• B. They are already included in GDP through consumption spending.

• C. They are irrelevant to economic performance.

• D. Excluding them underestimates the true economic contribution of individuals.