ECON 248 PRACTICE TEST 2026 TESTED
QUESTIONS WITH DETAILED SOLUTIONS
GRADED A+
●● Define GDP and how it is measured.
Answer: GDP: total monetary value of all final goods produced in a
country's borders during a specific time frame,
Calculated using the expenditure approach:
GDP = C + I + G + (X-M)
●● Difference between nominal GDP and real GDP.
Answer: Nominal GDP: economic output using current market prices
(susceptible to inflation).
Real GDP: adjusts for price changes using the base year to find true
value.
●● Limitations of GDP.
Answer: Income distribution
Non-market activities
Environmental quality
Leisure time
, Quality & innovation
Hidden economy
●● Define CPI and how it is measured.
Answer: CPI: average change in prices over time paid by consumers for
a "fixed basket" of goods.
●● Limitations of CPI.
Answer: Substitution bias
Quality adjustment bias
New goods bias
No reflection of individual spending
●● Compare CPI & GDP deflator as a measure of price level.
Answer: CPI: used for the cost of living in households using fixed
basket of goods.
GDP: used for price level of total domestic production using final goods.
●● Compare dollar figures from different times using price index.
Answer: CPI in Y/CPI in X
Y is current
X is past
QUESTIONS WITH DETAILED SOLUTIONS
GRADED A+
●● Define GDP and how it is measured.
Answer: GDP: total monetary value of all final goods produced in a
country's borders during a specific time frame,
Calculated using the expenditure approach:
GDP = C + I + G + (X-M)
●● Difference between nominal GDP and real GDP.
Answer: Nominal GDP: economic output using current market prices
(susceptible to inflation).
Real GDP: adjusts for price changes using the base year to find true
value.
●● Limitations of GDP.
Answer: Income distribution
Non-market activities
Environmental quality
Leisure time
, Quality & innovation
Hidden economy
●● Define CPI and how it is measured.
Answer: CPI: average change in prices over time paid by consumers for
a "fixed basket" of goods.
●● Limitations of CPI.
Answer: Substitution bias
Quality adjustment bias
New goods bias
No reflection of individual spending
●● Compare CPI & GDP deflator as a measure of price level.
Answer: CPI: used for the cost of living in households using fixed
basket of goods.
GDP: used for price level of total domestic production using final goods.
●● Compare dollar figures from different times using price index.
Answer: CPI in Y/CPI in X
Y is current
X is past
