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GDP and Inflation

Description: Test your knowledge on GDP and Inflation with this quiz.
Number of Questions: 15
Created by:
Tags: gdp inflation economics
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What is the full form of GDP?

  1. Gross Domestic Product

  2. Gross Domestic Profit

  3. Gross Domestic Price

  4. Gross Domestic Production

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Correct Option: A
Explanation:

GDP stands for Gross Domestic Product, which is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.

Which of the following is not a component of GDP?

  1. Consumption

  2. Investment

  3. Government Spending

  4. Exports

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Correct Option: D
Explanation:

Exports are not a component of GDP because they are already included in Consumption, Investment, and Government Spending.

What is the difference between nominal GDP and real GDP?

  1. Nominal GDP includes inflation, while real GDP does not.

  2. Real GDP includes inflation, while nominal GDP does not.

  3. Both nominal GDP and real GDP include inflation.

  4. Neither nominal GDP nor real GDP includes inflation.

Show answer
Correct Option: A
Explanation:

Nominal GDP is the value of all goods and services produced in an economy in current prices, while real GDP is the value of all goods and services produced in an economy in constant prices.

What is the relationship between GDP and inflation?

  1. GDP and inflation are positively correlated.

  2. GDP and inflation are negatively correlated.

  3. GDP and inflation are not correlated.

  4. The relationship between GDP and inflation depends on other factors.

Show answer
Correct Option: D
Explanation:

The relationship between GDP and inflation is complex and depends on a number of factors, including the state of the economy, the level of unemployment, and the government's monetary and fiscal policies.

What is the goal of monetary policy?

  1. To stabilize prices.

  2. To promote economic growth.

  3. To reduce unemployment.

  4. All of the above.

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Correct Option: D
Explanation:

The goal of monetary policy is to stabilize prices, promote economic growth, and reduce unemployment.

What is the goal of fiscal policy?

  1. To stabilize prices.

  2. To promote economic growth.

  3. To reduce unemployment.

  4. All of the above.

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Correct Option: D
Explanation:

The goal of fiscal policy is to stabilize prices, promote economic growth, and reduce unemployment.

What is the Phillips curve?

  1. A graph that shows the relationship between inflation and unemployment.

  2. A graph that shows the relationship between GDP and inflation.

  3. A graph that shows the relationship between GDP and unemployment.

  4. A graph that shows the relationship between inflation and interest rates.

Show answer
Correct Option: A
Explanation:

The Phillips curve is a graph that shows the relationship between inflation and unemployment. It is typically downward sloping, meaning that as inflation increases, unemployment decreases.

What is the natural rate of unemployment?

  1. The lowest level of unemployment that can be achieved without causing inflation.

  2. The highest level of unemployment that can be achieved without causing deflation.

  3. The level of unemployment that is consistent with stable prices.

  4. The level of unemployment that is consistent with full employment.

Show answer
Correct Option: C
Explanation:

The natural rate of unemployment is the level of unemployment that is consistent with stable prices. It is typically around 5%.

What is the relationship between inflation and interest rates?

  1. Inflation and interest rates are positively correlated.

  2. Inflation and interest rates are negatively correlated.

  3. Inflation and interest rates are not correlated.

  4. The relationship between inflation and interest rates depends on other factors.

Show answer
Correct Option: D
Explanation:

The relationship between inflation and interest rates is complex and depends on a number of factors, including the state of the economy, the level of unemployment, and the government's monetary and fiscal policies.

What is the difference between CPI and PPI?

  1. CPI measures the prices of goods and services purchased by consumers, while PPI measures the prices of goods and services purchased by businesses.

  2. CPI measures the prices of goods and services produced by consumers, while PPI measures the prices of goods and services produced by businesses.

  3. CPI measures the prices of goods and services sold by consumers, while PPI measures the prices of goods and services sold by businesses.

  4. CPI measures the prices of goods and services imported by consumers, while PPI measures the prices of goods and services exported by businesses.

Show answer
Correct Option: A
Explanation:

CPI (Consumer Price Index) measures the prices of goods and services purchased by consumers, while PPI (Producer Price Index) measures the prices of goods and services purchased by businesses.

What is the difference between core inflation and headline inflation?

  1. Core inflation excludes food and energy prices, while headline inflation includes food and energy prices.

  2. Core inflation includes food and energy prices, while headline inflation excludes food and energy prices.

  3. Core inflation measures the prices of goods and services purchased by consumers, while headline inflation measures the prices of goods and services purchased by businesses.

  4. Core inflation measures the prices of goods and services produced by consumers, while headline inflation measures the prices of goods and services produced by businesses.

Show answer
Correct Option: A
Explanation:

Core inflation excludes food and energy prices, while headline inflation includes food and energy prices. This is because food and energy prices are volatile and can fluctuate significantly in the short term.

What is the relationship between inflation and economic growth?

  1. Inflation and economic growth are positively correlated.

  2. Inflation and economic growth are negatively correlated.

  3. Inflation and economic growth are not correlated.

  4. The relationship between inflation and economic growth depends on other factors.

Show answer
Correct Option: D
Explanation:

The relationship between inflation and economic growth is complex and depends on a number of factors, including the state of the economy, the level of unemployment, and the government's monetary and fiscal policies.

What are the causes of inflation?

  1. Demand-pull inflation

  2. Cost-push inflation

  3. Imported inflation

  4. All of the above

Show answer
Correct Option: D
Explanation:

Inflation can be caused by demand-pull inflation, cost-push inflation, imported inflation, or a combination of these factors.

What are the consequences of inflation?

  1. Reduced purchasing power

  2. Increased uncertainty

  3. Social unrest

  4. All of the above

Show answer
Correct Option: D
Explanation:

Inflation can have a number of negative consequences, including reduced purchasing power, increased uncertainty, and social unrest.

How can inflation be controlled?

  1. Monetary policy

  2. Fiscal policy

  3. Supply-side policies

  4. All of the above

Show answer
Correct Option: D
Explanation:

Inflation can be controlled using a variety of tools, including monetary policy, fiscal policy, and supply-side policies.

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