Question 1

"As the credit crisis unfolded over the past year, one of the few certainties in the global economy seemed to be China's ability to plough on regardless of double- digit growth rates...The ...crisis has also focused ...on the need to update a growth model that...is still dependent on assembling goods for export without adding much value and on heavy industries that create pollution. Chinese companies have continued to find new foreign markets for their products...several other factors point to a slowing property market...production of steel, cement and air conditioners was down... Retail sales have risen by 23 per cent i each of the last two months".
Beijing's Burden, FT.com, by Geoff Dyer, Sept. 23,
-According to the article, _ are expected to contribute to China's real GDP in 2008.

Accepted Answer

Exports and consumption are expected to contribute positively to China's real GDP in 2008.

Question 2

Which of the following would lead GDP to overstate economic welfare?

Accepted Answer

Burning coal to produce energy creates more pollution, which has negative effects on the environment and human health. However, these negative effects are not accounted for in GDP, which only measures the value of goods and services produced. Therefore, GDP will overstate economic welfare in this scenario.

Answer: A and D
 A self-employed CPA taking a longer than normal vacation does not produce any economic value during that time, but GDP will still count his or her earlier work as part of GDP. This overstates economic welfare because the vacation time is not accounted for. Similarly, restaurant workers under-reporting tip income means that some economic activity is happening off the books and not being counted towards GDP, but individuals are still benefiting from the goods and services being provided by these workers. This may overstate economic welfare as well.

Choice B is not correct because home-cooked meals are a form of domestic production that is not counted in GDP, so it does not overstate economic welfare.

Question 3

The following data describe Mexico's economy in 2007.  From the data, we can conclude that n Mexico in 2007.

Accepted Answer

The data shows that consumption totaled $591 billion, which is the largest component of Mexico's GDP. The other options are incorrect, as the net exports were positive and not negative, imports were not the largest component of GDP, and GDP per person was not provided in the data.

Question 4

The use of purchasing power parity prices

Accepted Answer

Purchasing power parity prices account for differences in the prices of the same goods in different countries when measuring real GDP. This allows for more accurate cross-country comparisons of economic welfare.

Question 5

"As the credit crisis unfolded over the past year, one of the few certainties in the global economy seemed to be China's ability to plough on regardless of double- digit growth rates...The ...crisis has also focused ...on the need to update a growth model that...is still dependent on assembling goods for export without adding much value and on heavy industries that create pollution. Chinese companies have continued to find new foreign markets for their products...several other factors point to a slowing property market...production of steel, cement and air conditioners was down... Retail sales have risen by 23 per cent i each of the last two months".
Beijing's Burden, FT.com, by Geoff Dyer, Sept. 23,
-According to the article, can be expected to this year.

Accepted Answer

The article states that "Chinese companies have continued to find new foreign markets for their products". This suggests that exports are likely to increase this year.

Question 6

"As the credit crisis unfolded over the past year, one of the few certainties in the global economy seemed to be China's ability to plough on regardless of double- digit growth rates...The ...crisis has also focused ...on the need to update a growth model that...is still dependent on assembling goods for export without adding much value and on heavy industries that create pollution. Chinese companies have continued to find new foreign markets for their products...several other factors point to a slowing property market...production of steel, cement and air conditioners was down... Retail sales have risen by 23 per cent i each of the last two months".
Beijing's Burden, FT.com, by Geoff Dyer, Sept. 23,
-According to the article, in have contributed to Canada's change in real GDP.

Accepted Answer

The article states that "Chinese companies have continued to find new foreign markets for their products", which suggests that exports have increased. The article also states that "production of steel, cement and air conditioners was down", which suggests that investment has decreased.

Question 7

"As the credit crisis unfolded over the past year, one of the few certainties in the global economy seemed to be China's ability to plough on regardless of double- digit growth rates...The ...crisis has also focused ...on the need to update a growth model that...is still dependent on assembling goods for export without adding much value and on heavy industries that create pollution. Chinese companies have continued to find new foreign markets for their products...several other factors point to a slowing property market...production of steel, cement and air conditioners was down... Retail sales have risen by 23 per cent i each of the last two months".
Beijing's Burden, FT.com, by Geoff Dyer, Sept. 23,
-According to the article, is expected to increase and add to China's component of GDP.

Accepted Answer

Canada's economy expanded by...0.1 percent in the second quarter...further evidence that the economy has stalled...following a first quarter slip in gross domestic product. The second quarter figures fell well below forecasts of a 0.7 per cent growth in real GDP. Exports. fell for the fourth consecutive quarter. The accumulating gloom is increasingly discouraging business
investment. Consumer spending remains strong and corporate profits were at their highest since 2004. "The sources of strengt the second quarter are clearly unsustainable," said Sal Gautieri, senior economist at BMO capital markets.
Canada Avoids Fall into Recession, FT.com, by Christopher Mason, August 30

Question 8

Which of the following is NOT a reason that real GDP is a poor measure of a nation's economic welfare?

Accepted Answer

Real GDP does not overvalue household production; in fact, it often undervalues it because household production is typically not included in GDP calculations.

Question 9

Purchasing power parity prices are used to construct GDP data that

Accepted Answer

Purchasing power parity prices adjust for differences in the cost of living between countries, making it possible to make more valid comparisons of output, income and living standards between one country and another. This is particularly important when comparing countries with different currencies and price levels. However, PPP does not take into account the underground economy or other non-market activities that contribute to economic welfare, so it is not a perfect measure of economic welfare.

Question 10

What we produce during our working time is as part of GDP and the enjoyment we gain from our leisure time is as part of GDP.

Accepted Answer

What we produce during our working time is included in GDP as it contributes to the production of goods and services in the economy. However, the enjoyment we gain from our leisure time is not included in GDP as it is not a tangible economic output that contributes to the economy.

Question 11

It is estimated that in 2007, Mexico had a population of 110 million and Brazil had a population of 190 million. At the same time, Mexico's GDP was $1 trillion while Brazil's was $1.31 trillion. These data show that

Accepted Answer

The answer of It is estimated that in 2007, Mexico...

Question 12

The underground economy exists for all of the following reasons EXCEPT the

Accepted Answer

The underground economy refers to economic activity that is not regulated by the government or reported to official authorities. One of the main reasons for the existence of the underground economy is to avoid taxes and government regulation. Another reason may be the production of illegal goods or services. However, there is no incentive for maintaining accurate records of economic transactions in the underground economy as it is illegal and unreported. Therefore, the correct answer is D, desire to maintain accurate records of economic transactions, as it contradicts the basic nature of the underground economy.

Question 13

Because pollution reduces economic welfare, on this count real GDP

Accepted Answer

Real GDP is a measure of the total economic output of a country, but it does not take into account externalities such as pollution which can reduce economic welfare. Therefore, real GDP overstates economic welfare because it does not reflect the negative effects of pollution on health, environment and quality of life.

Question 14

In the post World War II period, considerable growth in total production took place in the U.S. But at the same time, businesses were dumping their waste into the Great Lakes with minimal cost to themselves, significantly polluting the bodies of water as a result. This occurrence is an example where

Accepted Answer

Real GDP only measures the total value of final goods and services produced and does not take into account negative externalities such as pollution. Therefore, it can give an overly positive view of economic welfare, as it does not reflect the true cost of production.

Question 15

The following data describe France's economy in 2008.

From the data, we can conclude that in France

Accepted Answer

The answer of The following data describe France's economy in...

Question 16

Pollution is a by- product of some production processes, so on this count real GDP as measured

Accepted Answer

Real GDP does not account for negative externalities like pollution, which can harm economic welfare. Therefore, it tends to overstate economic welfare by not deducting the costs associated with pollution.

Question 17

"As the credit crisis unfolded over the past year, one of the few certainties in the global economy seemed to be China's ability to plough on regardless of double- digit growth rates...The ...crisis has also focused ...on the need to update a growth model that...is still dependent on assembling goods for export without adding much value and on heavy industries that create pollution. Chinese companies have continued to find new foreign markets for their products...several other factors point to a slowing property market...production of steel, cement and air conditioners was down... Retail sales have risen by 23 per cent i each of the last two months".
Beijing's Burden, FT.com, by Geoff Dyer, Sept. 23,
-According to the article, the best description of Canada's position in the business cycle is

Accepted Answer

The answer of "As the credit crisis unfolded over the...

Question 18

Which of the following statements about the comparison between GDP in China and in the United States is correct?

Accepted Answer

When using purchasing power parity prices to value GDP in dollars, China's GDP per person is higher than when using the exchange rate. This is because purchasing power parity considers the relative cost of goods and services in each country, which can differ greatly from exchange rates. However, this still does not mean that China's GDP per person exceeds the GDP per person in the United States.

Question 19

If we compare the U.S. GDP and the Chinese GDP,

Accepted Answer

The U.S. real GDP per person is significantly higher than China's real GDP per person, even when adjusted for purchasing power parity.

Question 20

It is estimated that in 2007, Mexico had a population of 110 million and GDP of $1 trillion. In 2006, Mexico's population was 104 million and GDP was $839 billion. Per GDP person by
Between 2006 and 2007 in Mexico.

Accepted Answer

GDP per person increased by $1038 between 2006 and 2007 in Mexico.

Quiz 4: Measuring Gdp and Economic Growth