65 exam-style questions on Measuring economic activity and illustrating its variations — topic 3.1 of Macroeconomics in the IB Economics syllabus — with answers and explanations. Samples below; the full set is free with an account.
Which approach measures GDP by summing all wages, rent, interest and profits earned in an economy during a year?
Answer: The income approach
The income approach adds up all factor incomes (wages, rent, interest, profit). The expenditure approach sums C + I + G + (X − M), while the output approach sums value added across industries.
In which situation would a country's GNI most likely be lower than its GDP?
Answer: Much domestic output is by foreign-owned firms that send profits home
GNI = GDP + net income from abroad. When foreign-owned firms produce domestically and repatriate profits, income flows out, so net income from abroad is negative and GNI < GDP.
Which measure is most appropriate for comparing average living standards between two countries?
Answer: Real GDP per capita at purchasing power parity (PPP)
Comparing living standards requires adjusting for population size (per capita), price changes over time (real) and differences in the cost of living between countries (PPP).
Which of the following is a valid criticism of using real GDP per capita to compare well-being?
Answer: It ignores unpaid household and voluntary work
GDP records only market transactions, so unpaid work, the informal economy, income distribution and environmental damage are not captured — key limitations when judging well-being.
A farmer sells wheat to a miller for $100. The miller sells flour to a baker for $150. The baker sells bread to consumers for $270. What is the total contribution to GDP?
Answer: $270
GDP counts only the value of final goods, or equivalently the sum of value added at each stage ($100 + $50 + $120 = $270). Adding every transaction ($520) would double-count intermediate goods.
An economy experiences falling real GDP and rising unemployment for several consecutive quarters. Which phase of the business cycle is it in?
Answer: Contraction (recession)
In the contraction phase real output falls and unemployment rises. The trough is the turning point at the bottom, after which recovery begins.
That was 6 of 65 Measuring economic activity and illustrating its variations questions.
Practise all 65 freeDistinguishAO2 · 2–10 marks
Make the difference clear for BOTH terms — a definition of one of them is only half an answer.
DefineAO1 · 1–2 marks
Give the precise meaning — one sentence, the key terms in it, no example needed unless asked.
DrawAO4 · 1–4 marks
A labelled, accurate drawing with a ruler where lines are straight; axes and units on a graph.
65 Measuring economic activity and illustrating its variations questions — free with an account. Spaced repetition, streaks and full exam simulations included.
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