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GDP and Disposable Personal Income (DPI)

Description: This quiz will test your understanding of the concepts related to Gross Domestic Product (GDP) and Disposable Personal Income (DPI).
Number of Questions: 14
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Tags: gdp disposable personal income macroeconomics
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What is the difference between GDP and DPI?

  1. GDP is the total value of all goods and services produced in a country, while DPI is the total income received by individuals in a country.

  2. GDP is the total value of all goods and services produced in a country, while DPI is the total income received by individuals in a country after taxes and other deductions.

  3. GDP is the total value of all goods and services produced in a country, while DPI is the total income received by individuals in a country after taxes and other deductions, but before personal consumption expenditures.

  4. GDP is the total value of all goods and services produced in a country, while DPI is the total income received by individuals in a country after taxes and other deductions, but before personal saving.

Show answer
Correct Option: B
Explanation:

GDP measures the total value of all goods and services produced in a country, while DPI measures the total income received by individuals in a country after taxes and other deductions.

What are the components of GDP?

  1. Consumption, investment, government spending, and net exports.

  2. Consumption, investment, government spending, and imports.

  3. Consumption, investment, government spending, and exports.

  4. Consumption, investment, government spending, and trade balance.

Show answer
Correct Option: A
Explanation:

GDP is calculated by adding up consumption, investment, government spending, and net exports.

What is the relationship between GDP and DPI?

  1. DPI is always greater than GDP.

  2. DPI is always less than GDP.

  3. DPI is equal to GDP.

  4. DPI is equal to GDP minus taxes and other deductions.

Show answer
Correct Option: D
Explanation:

DPI is calculated by subtracting taxes and other deductions from GDP.

What are the factors that affect DPI?

  1. Taxes, government spending, and personal consumption expenditures.

  2. Taxes, government spending, and personal saving.

  3. Taxes, government spending, and personal disposable income.

  4. Taxes, government spending, and personal income.

Show answer
Correct Option: A
Explanation:

DPI is affected by taxes, government spending, and personal consumption expenditures.

How does DPI affect consumer spending?

  1. DPI has a positive effect on consumer spending.

  2. DPI has a negative effect on consumer spending.

  3. DPI has no effect on consumer spending.

  4. DPI has a positive effect on consumer spending in the short run, but a negative effect in the long run.

Show answer
Correct Option: A
Explanation:

DPI has a positive effect on consumer spending because it represents the amount of money that individuals have available to spend on goods and services.

What is the relationship between DPI and economic growth?

  1. DPI is a leading indicator of economic growth.

  2. DPI is a lagging indicator of economic growth.

  3. DPI is not related to economic growth.

  4. DPI is a coincident indicator of economic growth.

Show answer
Correct Option: A
Explanation:

DPI is a leading indicator of economic growth because it represents the amount of money that individuals have available to spend on goods and services, which can drive economic growth.

What are some of the policies that can be used to increase DPI?

  1. Cutting taxes, increasing government spending, and increasing personal consumption expenditures.

  2. Cutting taxes, decreasing government spending, and increasing personal consumption expenditures.

  3. Cutting taxes, increasing government spending, and decreasing personal consumption expenditures.

  4. Cutting taxes, decreasing government spending, and decreasing personal consumption expenditures.

Show answer
Correct Option: A
Explanation:

Policies that can be used to increase DPI include cutting taxes, increasing government spending, and increasing personal consumption expenditures.

What are some of the challenges associated with measuring GDP and DPI?

  1. The underground economy, inflation, and changes in the value of the currency.

  2. The underground economy, deflation, and changes in the value of the currency.

  3. The underground economy, inflation, and changes in the price level.

  4. The underground economy, deflation, and changes in the price level.

Show answer
Correct Option: A
Explanation:

Some of the challenges associated with measuring GDP and DPI include the underground economy, inflation, and changes in the value of the currency.

How can GDP and DPI be used to assess the economic health of a country?

  1. GDP and DPI can be used to measure the size of a country's economy.

  2. GDP and DPI can be used to measure the growth rate of a country's economy.

  3. GDP and DPI can be used to measure the standard of living in a country.

  4. All of the above.

Show answer
Correct Option: D
Explanation:

GDP and DPI can be used to measure the size of a country's economy, the growth rate of a country's economy, and the standard of living in a country.

What is the difference between nominal GDP and real GDP?

  1. Nominal GDP is the value of all goods and services produced in a country in current prices, while real GDP is the value of all goods and services produced in a country in constant prices.

  2. Nominal GDP is the value of all goods and services produced in a country in current prices, while real GDP is the value of all goods and services produced in a country in base year prices.

  3. Nominal GDP is the value of all goods and services produced in a country in current prices, while real GDP is the value of all goods and services produced in a country in previous year prices.

  4. Nominal GDP is the value of all goods and services produced in a country in current prices, while real GDP is the value of all goods and services produced in a country in future year prices.

Show answer
Correct Option: A
Explanation:

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

How is the GDP deflator calculated?

  1. GDP deflator = (Nominal GDP / Real GDP) * 100

  2. GDP deflator = (Real GDP / Nominal GDP) * 100

  3. GDP deflator = (Nominal GDP - Real GDP) * 100

  4. GDP deflator = (Real GDP - Nominal GDP) * 100

Show answer
Correct Option: A
Explanation:

The GDP deflator is calculated by dividing nominal GDP by real GDP and multiplying by 100.

What is the relationship between the GDP deflator and inflation?

  1. The GDP deflator is a measure of inflation.

  2. The GDP deflator is a measure of deflation.

  3. The GDP deflator is not related to inflation.

  4. The GDP deflator is a measure of both inflation and deflation.

Show answer
Correct Option: A
Explanation:

The GDP deflator is a measure of inflation because it measures the rate of change in the prices of all goods and services produced in a country.

How is personal disposable income calculated?

  1. Personal disposable income = Personal income - Personal taxes - Personal non-tax payments.

  2. Personal disposable income = Personal income + Personal taxes + Personal non-tax payments.

  3. Personal disposable income = Personal income - Personal taxes + Personal non-tax payments.

  4. Personal disposable income = Personal income + Personal taxes - Personal non-tax payments.

Show answer
Correct Option: A
Explanation:

Personal disposable income is calculated by subtracting personal taxes and personal non-tax payments from personal income.

What is the relationship between personal disposable income and consumer spending?

  1. Personal disposable income has a positive effect on consumer spending.

  2. Personal disposable income has a negative effect on consumer spending.

  3. Personal disposable income has no effect on consumer spending.

  4. Personal disposable income has a positive effect on consumer spending in the short run, but a negative effect in the long run.

Show answer
Correct Option: A
Explanation:

Personal disposable income has a positive effect on consumer spending because it represents the amount of money that individuals have available to spend on goods and services.

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