Question 1

You find that your paycheck for the year is higher this year than last. Does that mean that your real income has increased? Explain carefully.

Accepted Answer

The answer of You find that your paycheck for the...

Question 2

Which of the following is a true statement?

Accepted Answer

International data consistently show that a nation's GDP per person is positively correlated with its citizens' standard of living. This means that countries with higher GDP per capita tend to have higher levels of education, healthcare, and overall well-being.

B is incorrect because there can be significant differences in standards of living even if two countries have similar levels of real GDP per person. For example, if one country has a more equal distribution of income or a stronger welfare system, its citizens may have a higher standard of living despite a similar GDP per capita to another country.

C is incorrect because leisure time is not included in the calculation of GDP per person. GDP per capita only measures the value of goods and services produced within a country's borders, not the value of people's time or well-being outside of work.

D is incorrect because while income distribution is an important factor in overall well-being, it is not necessarily closely associated with GDP per person. Some countries with high GDP per capita, like the United States, have relatively high levels of income inequality, while other countries with similar GDP per capita, like Sweden or Denmark, have much more equal income distribution.

Question 3

Which of the following statements regarding GDP is correct?

Accepted Answer

GDP only takes into account the total value of goods and services produced within a country's borders, without considering externalities such as environmental damage or social welfare.

Question 4

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person?

Accepted Answer

Real GDP per person is calculated by adjusting nominal GDP for inflation and dividing it by population. Since prices have doubled, the inflation rate is 100%, which means that nominal GDP must be divided by 2 to get real GDP. Therefore, the real GDP per person increased by 50% (3/2), which is less than double the initial amount. So, the correct choice is B because real GDP per person increased, but it less than doubled.

Question 5

Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year (and thus enjoy less leisure per year). Based on this scenario, which of the following statements is correct?

Accepted Answer

GDP only measures the monetary value of goods and services produced by a country within a given period, and it does not factor in leisure. Thus, if the elimination of holidays increases production, GDP would increase as a result, regardless of whether people work more or less leisure time. Therefore, the correct answer is B since GDP excludes leisure.

Question 6

Suppose the government eliminates all environmental regulations and, as a result, the production of goods and services increases, but there is considerably more pollution. Based on this scenario, which of the following statements is correct?

Accepted Answer

GDP is a measure of economic output and does not factor in environmental quality. Therefore, if environmental regulations were eliminated and production increased, GDP would increase since it only measures the monetary value of goods and services produced. The fact that there is more pollution is not taken into account in the calculation of GDP.

Question 7

GDP does not reflect

Accepted Answer

GDP only measures the value of goods and services produced within a country's borders, but it does not account for the value of leisure, the value of goods and services produced at home, or the quality of the environment. Therefore, all of the above options are correct.

Question 8

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?

Accepted Answer

The answer of The information below for 2008 in millions...

Question 9

GDP per person tells us the income and expenditure of the

Accepted Answer

GDP per person, or per capita GDP, divides the gross domestic product by the population, providing an average economic output or income per person, which represents the average person in the economy.

Question 10

GDP is not a perfect measure of well-being; for example,

Accepted Answer

All of the above are correct. GDP only measures the value of goods and services produced within a country's economy, which means it does not address other factors that contribute to overall well-being, such as the value of volunteer work, the distribution of income, and environmental quality. Therefore, while GDP can be a useful tool in assessing economic growth and development, it should not be relied upon as the sole indicator of a country's well-being.

Question 11

The information for 2008 in millions in the table below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of real GDP per person from highest to lowest?

Accepted Answer

The answer of The information for 2008 in millions in...

Question 12

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person

Accepted Answer

Nominal GDP measures the current dollar value of goods and services produced in an economy. However, it does not take into account changes in the overall price level, which can distort the growth rate of the economy. Real GDP, on the other hand, adjusts for changes in the price level, providing a more accurate measure of economic growth. To calculate real GDP per person, we need to divide real GDP by the population.

In this case, we can use the following formula:

Real GDP per person = (Nominal GDP / GDP deflator) / Population

Real GDP per person = (12% / 106%) / (1 + 4%)

Real GDP per person = 7.84%

Therefore, real GDP per person grew by less than 12 percent, or B.

Question 13

Between 1929 and 1933, NNP measured in current prices fell from $96 billion to $48 billion. Over the same period, the relevant price index fell from 100 to 75.
a.What was the percentage decline in nominal NNP from 1929 to1933?
b.What was the percentage decline in real NNP from 1929 to 1933? Show your work.

Accepted Answer

The answer of Between 1929 and 1933, NNP measured in...

Question 14

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?

Accepted Answer

The answer of The information below for 2008 in millions...

Question 15

U.S. real GDP is substantially higher today than it was 60 years ago. What does this tell us, and what does it not tell us, about the well-being of U.S. residents?

Accepted Answer

The answer of U.S. real GDP is substantially higher today...

Question 16

The underground economy

Accepted Answer

The underground economy includes legal transactions that go unreported or unrecorded, such as paying someone in cash for a service without reporting it for tax purposes. It is also commonly referred to as the "shadow economy" or the "informal economy." It is difficult to accurately measure the size of the underground economy but it is believed to be significant in both developed and developing nations.

Question 17

GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is

Accepted Answer

While GDP is a useful measure of the overall economic activity in a country, it does not necessarily reflect the well-being of individuals. GDP per person, also known as GDP per capita, provides a more accurate representation of the average economic output per person in a country. This takes into account factors such as population growth and distribution, and provides a better indication of the standard of living and economic well-being of individuals.

Question 18

GDP is not a perfect measure of well-being; for example,

Accepted Answer

The answer of GDP is not a perfect measure of...

Question 19

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that

Accepted Answer

GDP measures the economic output of a nation, which indirectly indicates the resources available to invest in welfare-enhancing goods and services, such as education and healthcare. It does not directly measure welfare but suggests the capacity to support it.

Question 20

Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a population of 100. Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150. What happened to the real GDP per person?

Accepted Answer

The answer of Suppose that twenty-five years ago a country...

Quiz 23: Measuring a Nation S Income

You find that your paycheck for the year is higher this year than last. Does that mean that your real income has increased? Explain carefully.

Which of the following is a true statement?

Which of the following statements regarding GDP is correct?

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person?

Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year (and thus enjoy less leisure per year) . Based on this scenario, which of the following statements is correct?

Suppose the government eliminates all environmental regulations and, as a result, the production of goods and services increases, but there is considerably more pollution. Based on this scenario, which of the following statements is correct?

GDP does not reflect

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?

GDP per person tells us the income and expenditure of the

GDP is not a perfect measure of well-being; for example,

The information for 2008 in millions in the table below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of real GDP per person from highest to lowest?

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?

U.S. real GDP is substantially higher today than it was 60 years ago. What does this tell us, and what does it not tell us, about the well-being of U.S. residents?

The underground economy

GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is

GDP is not a perfect measure of well-being; for example,

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that

Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a population of 100. Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150. What happened to the real GDP per person?