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Eco 4223 Exam 1 Exam latest update Practice Questions (Original) EXAM | 2026–2027
Latest Update | Original Questions & Answers with Detailed Rationales | Graded A+
Section 1: National Income Accounting & GDP
Q1. Which of the following contributes to GDP?
A. The sales price of a home built thirty years ago.
B. The value of all final goods and services.
C. Intermediate goods used to produce final goods.
D. Purchases of stocks and bonds.
Correct Answer: B
Rationale: GDP measures the value of all final goods and
services produced during a period. Resale of existing homes,
intermediate goods, and financial asset purchases are excluded
to avoid double counting .
Q2. Which statement is true regarding GDP?
A. GDP includes the purchases of goods and services produced
in the past.
B. GDP includes purchases of stocks and bonds.
C. GDP does not include intermediate goods.
D. GDP includes the sale of used goods.
Correct Answer: C
Rationale: Intermediate goods are used up in the production of
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final goods; including them would double count. GDP also
excludes past production, financial assets, and used goods .
Q3. If nominal GDP in 2001 is $18 trillion and 2001 real GDP in
1996 prices is $12 trillion, the GDP deflator is:
A. 200
B. 150
C. 100
D. 7
Correct Answer: B
Rationale: GDP deflator = (Nominal GDP / Real GDP) × 100 = (18
/ 12) × 100 = 150 .
Q4. If the price level rises from 200 in year 1 to 220 in year 2,
the inflation rate is:
A. 20%
B. 10%
C. 120%
D. 11%
Correct Answer: B
Rationale: Inflation = [(220 − 200) / 200] × 100 = 10% .
Q5. Nominal GDP in 2010, if real GDP in 2009 prices is $12
billion and the GDP deflator is 114, equals:
A. $13.68 billion
B. $9.0 billion
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C. $12.96 billion
D. $8.48 billion
Correct Answer: A
Rationale: Nominal GDP = Real GDP × (Deflator / 100) = 12 ×
1.14 = $13.68 billion .
Q6. GDP is best defined as the total market value of:
A. All goods and services exchanged in an economy in a year.
B. All final goods and services produced within a country in a
given period.
C. All income earned by a country's citizens anywhere in the
world.
D. All goods and services produced by a country's citizens,
regardless of location.
Correct Answer: B
Rationale: GDP measures domestic production of final goods
and services during a specified period, regardless of the
producer's nationality.
Q7. Which item is excluded from GDP because it is not a market
transaction?
A. A newly constructed house.
B. A haircut purchased at a salon.
C. The value of homemaker services.
D. A restaurant meal.
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Correct Answer: C
Rationale: Nonmarket activities such as unpaid household labor
are not counted in GDP because they are not exchanged in
markets.
Q8. If a U.S. citizen works in Japan, her production is included
in:
A. U.S. GDP but not U.S. GNP.
B. U.S. GNP but not U.S. GDP.
C. Both U.S. GDP and U.S. GNP.
D. Neither U.S. GDP nor U.S. GNP.
Correct Answer: B
Rationale: GNP counts income earned by a country's residents
wherever they are; GDP counts production within a country's
borders. Her output is in Japan's GDP but in U.S. GNP.
Q9. Net national product (NNP) equals GNP minus:
A. Indirect business taxes.
B. Depreciation.
C. Transfer payments.
D. Personal taxes.
Correct Answer: B
Rationale: NNP = GNP − depreciation (capital consumption
allowance).
Q10. National income equals NNP minus:
A. Depreciation.
Eco 4223 Exam 1 Exam latest update Practice Questions (Original) EXAM | 2026–2027
Latest Update | Original Questions & Answers with Detailed Rationales | Graded A+
Section 1: National Income Accounting & GDP
Q1. Which of the following contributes to GDP?
A. The sales price of a home built thirty years ago.
B. The value of all final goods and services.
C. Intermediate goods used to produce final goods.
D. Purchases of stocks and bonds.
Correct Answer: B
Rationale: GDP measures the value of all final goods and
services produced during a period. Resale of existing homes,
intermediate goods, and financial asset purchases are excluded
to avoid double counting .
Q2. Which statement is true regarding GDP?
A. GDP includes the purchases of goods and services produced
in the past.
B. GDP includes purchases of stocks and bonds.
C. GDP does not include intermediate goods.
D. GDP includes the sale of used goods.
Correct Answer: C
Rationale: Intermediate goods are used up in the production of
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final goods; including them would double count. GDP also
excludes past production, financial assets, and used goods .
Q3. If nominal GDP in 2001 is $18 trillion and 2001 real GDP in
1996 prices is $12 trillion, the GDP deflator is:
A. 200
B. 150
C. 100
D. 7
Correct Answer: B
Rationale: GDP deflator = (Nominal GDP / Real GDP) × 100 = (18
/ 12) × 100 = 150 .
Q4. If the price level rises from 200 in year 1 to 220 in year 2,
the inflation rate is:
A. 20%
B. 10%
C. 120%
D. 11%
Correct Answer: B
Rationale: Inflation = [(220 − 200) / 200] × 100 = 10% .
Q5. Nominal GDP in 2010, if real GDP in 2009 prices is $12
billion and the GDP deflator is 114, equals:
A. $13.68 billion
B. $9.0 billion
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C. $12.96 billion
D. $8.48 billion
Correct Answer: A
Rationale: Nominal GDP = Real GDP × (Deflator / 100) = 12 ×
1.14 = $13.68 billion .
Q6. GDP is best defined as the total market value of:
A. All goods and services exchanged in an economy in a year.
B. All final goods and services produced within a country in a
given period.
C. All income earned by a country's citizens anywhere in the
world.
D. All goods and services produced by a country's citizens,
regardless of location.
Correct Answer: B
Rationale: GDP measures domestic production of final goods
and services during a specified period, regardless of the
producer's nationality.
Q7. Which item is excluded from GDP because it is not a market
transaction?
A. A newly constructed house.
B. A haircut purchased at a salon.
C. The value of homemaker services.
D. A restaurant meal.
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Correct Answer: C
Rationale: Nonmarket activities such as unpaid household labor
are not counted in GDP because they are not exchanged in
markets.
Q8. If a U.S. citizen works in Japan, her production is included
in:
A. U.S. GDP but not U.S. GNP.
B. U.S. GNP but not U.S. GDP.
C. Both U.S. GDP and U.S. GNP.
D. Neither U.S. GDP nor U.S. GNP.
Correct Answer: B
Rationale: GNP counts income earned by a country's residents
wherever they are; GDP counts production within a country's
borders. Her output is in Japan's GDP but in U.S. GNP.
Q9. Net national product (NNP) equals GNP minus:
A. Indirect business taxes.
B. Depreciation.
C. Transfer payments.
D. Personal taxes.
Correct Answer: B
Rationale: NNP = GNP − depreciation (capital consumption
allowance).
Q10. National income equals NNP minus:
A. Depreciation.
