Question 1

Over time,people have come to rely more on market-produced goods and less on goods that they produce for themselves.For example,busy people with high incomes,rather than cleaning their own houses,hire people to clean their houses.By itself,this change has

Accepted Answer

The increase in reliance on market-produced goods, such as hiring someone to clean your house, leads to an increase in the production of goods and services in the market. This increase in production leads to an increase in GDP. Therefore, this change has caused GDP to rise.

Question 2

Comparisons of GDP between developed and underdeveloped countries are often misleading because underdeveloped countries produce

Accepted Answer

Underdeveloped countries often have a larger informal or household sector where economic activity is not measured as part of GDP. This means that their GDP may be understated compared to developed countries, which have a smaller informal sector. Option A correctly identifies this issue and explains why GDP comparisons may be misleading.

Question 3

If the underground economy is sizable,then GDP will

Accepted Answer

The underground economy is by definition not accounted for in official GDP calculations. Therefore, if it is sizable, GDP will understate the actual size and performance of the economy.

Question 4

Use of real GDP to measure changes in national output from one period to another can be misleading if

Accepted Answer

The answer of Use of real GDP to measure changes...

Question 5

Use the table below to choose the correct answer.
Table 7-10
 
-Refer to Table 7-10.Measured in 1993 prices,real GDP in 2003 was

Accepted Answer

The answer of Use the table below to choose the...

Question 6

Use the table below to choose the correct answer.
Table 7-11
 
-Refer to Table 7-11.Measured in 2000 prices,indicate the increase in real GDP between 2000 and 2003.

Accepted Answer

The correct answer is based on the information provided in Table 7-11, which indicates that the real GDP increased by $333 billion when measured in 2000 prices between the years 2000 and 2003.

Question 7

Because GDP does not fully account for improvements in the quality of goods,

Accepted Answer

GDP calculations only take into account the quantity of goods produced, not necessarily the quality improvements. Therefore, if there are quality improvements in goods, the true value of those goods are higher than what is accounted for in the GDP calculation, leading to an understatement of real GDP. However, if GDP was not adjusted for quality improvements, it would overstate economic growth because higher prices would be interpreted as an increase in output when it is really just an increase in quality. This leads to an overstatement of inflation. Therefore, the inflation rate is overstated and real GDP is understated.

Question 8

Use the table below to answer the following question.
Table 7-13
 
-Refer to Table 7-13.Between 2001 and 2002,the real output of this economy increased by approximately

Accepted Answer

Real output increased from 100 in 2001 to 101.9 in 2002, an increase of 1.9%.

Question 9

Use the table below to answer the following question(s).
Table 7-12
 
-Refer to Table 7-12.Measured in terms of 2000 prices,real GDP in 2005 was

Accepted Answer

Looking at the table, the value for real GDP in 2005 is 3,750. The table header specifies that the values in the table are in billions of dollars, so we need to multiply 3,750 by 1,000 to get the actual GDP in billions of dollars. This gives us 3.75 trillion dollars. Measured in terms of 2000 prices, the GDP deflator for 2005 is 150 (i.e. the nominal GDP is 150% of the GDP in 2000). So, to get the real GDP in 2005 in terms of 2000 prices, we divide the nominal GDP by the GDP deflator: 3.75 trillion / 1.5 = 2.5 trillion dollars. Measured in terms of 2000 prices, real GDP in 2005 was $2.5 trillion, which is equivalent to 750 billion dollars (i.e. $2.5 trillion / 1,000 = 750 billion dollars). Therefore, the correct answer is B.

Question 10

Which of the following is a shortcoming of GDP?

Accepted Answer

GDP does not account for nonmarket transactions such as household production, volunteer work, or other non-monetized activities. This can lead to an underrepresentation of economic activity and wellbeing within a country.

Question 11

Because GDP does not fully account for improvements in the quality of goods,the GDP calculation

Accepted Answer

GDP does not fully account for improvements in the quality of goods, which means that the true value of output is higher than what is reflected in the GDP calculation. This is because GDP only measures the quantity of goods produced, not the quality improvements. Therefore, the GDP calculation tends to understate the true value of output in the United States.

Question 12

One difficulty of computing the value of GDP is that there are no market prices for

Accepted Answer

The answer of One difficulty of computing the value of...

Question 13

Over the last few decades,Americans have chosen to cook less at home and eat more at restaurants.This change in behavior,by itself,has

Accepted Answer

The increase in restaurant meals has led to an increase in economic activity, which is reflected in GDP. Therefore, the increase in restaurant spending has increased measured GDP by the full value of the restaurant meals.

Question 14

Because of transactions which take place in the underground economy,the

Accepted Answer

The underground economy is made up of transactions that are not reported to the government or included in official statistics. These transactions could include illegal activities or legitimate activities where individuals or businesses do not report income or pay taxes. As a result, these transactions are not included in the calculation of GDP, which measures the value of all goods and services produced in an economy. Therefore, the GDP calculation tends to understate the actual value of goods sold in the economy.

Question 15

If nominal GDP increased 2 percent during a year,while real GDP increased 4 percent,the

Accepted Answer

The answer of If nominal GDP increased 2 percent during...

Question 16

Assume that between 1998 and 2008,nominal GDP increased from $7 trillion to $12 trillion and that the price index rose from 100 to 133.3.Which of the following expresses GDP for 2008 in terms of 1998 prices?

Accepted Answer

To express GDP for 2008 in terms of 1998 prices, we need to use the GDP deflator, which measures the price level of all final goods and services included in GDP.

The formula to convert nominal GDP to real GDP using the GDP deflator is:

Real GDP = Nominal GDP / (GDP deflator/100)

In this case, we are trying to find the real GDP for 2008 in terms of 1998 prices.

Nominal GDP for 2008 is given as $12 trillion.

The GDP deflator for 1998 is 100, and for 2008 it is 133.3.

Plugging these values into the formula, we get:

Real GDP 2008 = $12 trillion / (133.3/100)
Real GDP 2008 = $9 trillion

Therefore, the best choice is B) $9.0 trillion.

Question 17

In recent years,people have benefited from greater amounts of leisure time.This trend

Accepted Answer

Leisure time is not accounted for in GDP as it is not considered as an economic activity that generates income. GDP only measures the economic production and consumption of goods and services.

Question 18

Generally,the greater the amount of productive activities generated by the household sector,

Accepted Answer

If there are a lot of productive activities being generated by the household sector that are not included in the official measures of GDP, such as unpaid work or informal sector activities, then the current GDP will likely be understated, meaning that it is not accurately capturing the full extent of actual productive activity in the economy.

Question 19

Use the table below to answer the following question(s).
Table 7-12
 
-Refer to Table 7-12.Between 2000 and 2005,the general level of prices increased by approximately

Accepted Answer

Between 2000 and 2005, the CPI increased from 150 to 200. This is a 33.3% increase ([200-150]/150 x 100).

Question 20

GDP is not a perfect measure of welfare because it

Accepted Answer

GDP does not distinguish between spending on goods and services that improve well-being (such as education) and those that do not (such as candy).

Quiz 7: Ataking the Nations Economic Pulse