Excellent Economics Real Vs Nominal Gdp Test - 88+ MCQs: Economics Quiz: Assess Your Knowledge with Real vs. Nominal GDP Questions and Answers

1. What is the main drawback of using GDP as a measure of economic well-being?

It does not account for inflation

It only considers the quantity of goods produced

It excludes the services sector

It does not capture income distribution and quality of life

2. Explain the term 'stagflation' and its implications for economic policymakers.

Stagflation refers to rapid economic growth with low inflation

It describes a period of high unemployment and high inflation

Stagflation signifies economic stability with moderate growth and inflation

It denotes a recession without inflationary pressures

3. What is the role of the Bureau of Economic Analysis (BEA) in GDP calculation?

It sets interest rates

It measures inflation

It calculates GDP for all countries

It provides official GDP estimates for the United States

4. What distinguishes between absolute and comparative advantage in international trade?

They are synonymous terms

Absolute advantage considers the total output, while comparative advantage assesses opportunity costs

Absolute advantage focuses on opportunity costs, while comparative advantage considers the total output

Absolute advantage is relevant in closed economies, while comparative advantage is applicable in open economies

5. Explain the concept of 'per capita GDP' and its significance in economic analysis.

It measures the total economic output of a country

It assesses the distribution of wealth within a country

It calculates the average economic output per person and helps compare living standards

It reflects the inflation rate of a country

6. What does GDP stand for?

Gross Domestic Profit

General Domestic Product

Gross Development Percentage

Gross Domestic Product

7. What is the 'Triffin Dilemma' and how does it relate to the stability of the international monetary system?

The Triffin Dilemma suggests that trade imbalances have no impact on the international monetary system

It describes the challenge of maintaining a national currency as the global reserve currency

Triffin Dilemma emphasizes the role of gold in the international monetary system

It indicates the stability of the international monetary system is not affected by currency values

8. How does inflation impact the calculation of Nominal GDP?

Inflation is not considered in Nominal GDP

Inflation increases Nominal GDP

Inflation decreases Nominal GDP

Inflation has no impact on Nominal GDP

9. Explain the concept of 'moral hazard' in the context of financial markets and its implications.

Moral hazard refers to ethical considerations in financial decision-making

It has no relevance in financial markets

Moral hazard arises when one party in a transaction takes excessive risks, knowing that it will not bear the full consequences

It denotes the stability and integrity of financial institutions

10. In the context of GDP, what does the 'underground economy' refer to?

It represents economic activities conducted beneath the surface of the earth

It includes illegal and unreported economic activities that escape official measurements

It signifies economic activities related to the development of underground resources

It describes the portion of GDP generated by subterranean industries

11. In the context of fiscal policy, what is the difference between discretionary and automatic stabilizers?

Discretionary stabilizers are government actions taken in response to economic conditions, while automatic stabilizers are predetermined features that automatically respond to economic changes

Automatic stabilizers involve deliberate government interventions, while discretionary stabilizers operate automatically

Both terms refer to the same concept

Discretionary stabilizers are tax policies, while automatic stabilizers are spending policies

12. Explain the concept of 'hysteresis' in unemployment.

It refers to the natural rate of unemployment

It describes the impact of inflation on unemployment

It signifies the persistence of high unemployment rates due to prolonged economic downturns

It represents the rate of unemployment at full employment

13. In which economic sector does GDP include household spending on goods and services?

Government Sector

Business Sector

Consumer Sector

Investment Sector

14. What is the Laffer Curve used to illustrate in economics?

The relationship between inflation and unemployment

The impact of taxation on government revenue

The trade-off between economic growth and income inequality

The connection between interest rates and investment

15. What role does 'behavioral economics' play in understanding consumer choices and market dynamics?

Behavioral economics focuses solely on rational decision-making

It has no relevance in understanding consumer choices

Behavioral economics explores the impact of psychological factors on decision-making and market outcomes

It deals exclusively with macroeconomic trends

16. Which economic sector includes government spending on goods and services?

Consumer sector

Business sector

Government sector

Investment sector

17. What effect does a trade surplus have on a country's GDP?

Increases GDP

Decreases GDP

Has no impact on GDP

Depends on the level of imports

18. In the context of GDP, what is the difference between value-added and final output?

Value-added measures the total output of an economy, while final output focuses on specific industries

Final output includes intermediate goods, while value-added excludes them

Value-added accounts for government spending, while final output does not

Final output measures the total output of an economy, while value-added focuses on specific industries

19. How does the 'quantity theory of money' explain the relationship between money supply and inflation?

It states that the quantity of money is irrelevant to inflation

It suggests that changes in money supply directly impact inflation rates

It emphasizes the importance of interest rates in controlling inflation

It argues that inflation is solely determined by government spending

20. In the context of fiscal policy, what is the difference between regressive and progressive taxation?

They are synonymous terms

Regressive taxation imposes higher tax rates on higher incomes, while progressive taxation imposes higher rates on lower incomes

Progressive taxation imposes higher tax rates on higher incomes, while regressive taxation imposes higher rates on lower incomes

Regressive taxation is a form of indirect taxation, while progressive taxation is direct

Economics Quiz - Real vs. Nominal GDP 4