Question 1

Peg's Manicure Manor did 4,000 sets of nails in 2015 and 4,500 sets of nails in 2016. The price of a set of nails was $20 in 2015 and $22 in 2016. If 2015 is the base year, Peg's contribution to real GDP in 2016 was ________ and to nominal GDP in 2016 was ________.
A)$80,000; $88,000
B)$80,000; $90,000
C)$80,000; $99,000
D)$90,000; $99,000

Accepted Answer

First note that in order to find Peg's contribution to real GDP, we must use the price of nails in the base years ($20), so Peg's contribution to real GDP in 2016 was: (4,500 nails × $20)= $90,000. Peg's contribution to nominal GDP in 2016 was: (4,500 nails × $22)= $99,000.

Question 2

GDP excludes important factors that affect people's well-being, such as the value of:
A)leisure time.
B)government purchases of goods and services.
C)services purchased by households.
D)goods produced domestically but sold to foreigners.

Accepted Answer

Since leisure time is not traded in conventional markets, it is not measured in GDP even though leisure time is very important.

Question 3

If you knew that two countries had the same level of real GDP per person, what additional piece of information would help you determine in which country people had a better standard of living?
A)The total physical volume of output for each country
B)The population of each country
C)The average number of hours worked per week in each country
D)The average level of prices in each country

Accepted Answer

GDP does not included information about how many hours were worked to produce that level of GDP.

Question 4

Countries with high real GDP tend to have ________ infant mortality rates and ________ literacy rates than countries with low real GDP.
A)higher; higher
B)higher; lower
C)lower; higher
D)lower; lower

Accepted Answer

High GDP correlates with many favorable non-economic conditions. Conversely, low GDP correlates with higher rates of infant mortality and lower rates of literacy.

Question 5

Although GDP is not the same as economic well-being, high levels of GDP are positively correlated with all of the following except:
A)longer life expectancies.
B)higher rates of literacy.
C)higher material standards of living.
D)higher rates of infant mortality.

Accepted Answer

High GDP correlates with many favorable non-economic conditions. Conversely, low GDP correlates with higher rates of infant mortality and many other non-favorable economic conditions.

Question 6

A person 16 years or older who does not work, but is actively looking for work, is officially classified as:
A)employed.
B)unemployed.
C)chronically unemployed.
D)out of the labor force.

Accepted Answer

A person is considered to be unemployed if he or she did not work during the preceding week but made some effort to find work in the past four weeks.

Question 7

Who from among the following would be counted as unemployed?
A)A person with a part-time job who wants and is looking for a full-time job.
B)A person who is willing to work and has looked for a job in the last week.
C)A person who is willing to work but has not looked for a job in two months.
D)All of these people would be counted as unemployed.

Accepted Answer

For a person to be classified as unemployed, he or she must be willing to work and have recently looked for work.

Question 8

If two countries are economically identical except that there is significant air and water pollution in one, then the level of GDP:
A)will be higher in the country with pollution.
B)will be higher in the country with no pollution.
C)will be the same in both countries.
D)will be greater than the level of economic well-being in each country.

Accepted Answer

GDP does not account for pollution and other non-traded features of the economy.

Question 9

The table below gives the quantities and prices for 2005 and 2015 for an economy that produces just two goods: sailboats and coconuts.   
For this economy that produces just sailboats and coconuts, and with 2005 as the base year, nominal GDP was approximately ________ times larger in 2015 than it was in 2005.
A)1.34
B)1.65
C)1.77
D)2.19

Accepted Answer

Nominal GDP in 2005 was (10 sailboats × $500)+ (2,000 coconuts × $1)= $7,000 and nominal GDP in 2015 was (20 sailboats × $525)+ (2,400 coconuts × $2)= $15,300. So the economy was 2.19 times larger ($15,300 / $7,000)in 2015 in nominal dollars.

Question 10

One shortcoming of real GDP as an indicator of society's social well-being is that it fails to take into account the:
A)growth in productivity.
B)increase in the quantity of goods.
C)non-market production.
D)change in the price level.

Accepted Answer

Real GDP does not measure things that are not traded in conventional markets, such as mowing your own lawn or cooking your own dinner.

Question 11

Who from among the following would be classified as out of the labor force?
A)A person with a part-time job who wants and is looking for a full-time job.
B)A person who is willing to work and has looked for a job in the last week.
C)A person who is willing to work but has not looked for a job in two months.
D)None of these people would be classified as out of the labor force.

Accepted Answer

For a person to be classified as out of the labor force, he or she must not be actively looking for work.

Question 12

Despite some problems with equating GDP with economic well-being, higher real GDP per person does imply greater economic well-being because it tends to be positively associated with:
A)crime, pollution, and economic inequality.
B)better education, health and life expectancy.
C)poverty, depletion of nonrenewable resources, and congestion.
D)unemployment, availability of goods and services, and better education.

Accepted Answer

High GDP correlates with many favorable non-economic conditions. Conversely, low GDP correlates with many unfavorable non-economic conditions.

Question 13

Real GDP is not a perfect measure of economic well-being because it excludes the value of all of the following except:
A)leisure time.
B)goods and services available in the market economy.
C)nonmarket economic activity.
D)goods and services produced in the underground economy.

Accepted Answer

GDP only measures things that are purchased in conventional markets, which excludes the underground economy, nonmarket activity, and leisure time.

Question 14

A person 16 years or older who works part-time is officially classified as:
A)employed.
B)unemployed.
C)chronically unemployed.
D)out of the labor force.

Accepted Answer

A person is employed if he or she worked full-time or part-time (even for a few hours)during the past week or is on vacation or sick leave from a regular job.

Question 15

Using real GDP to compare the level of economic well-being in two countries may be misleading because the value of ________ contributes to economic well-being, but is excluded from real GDP.
A)capital goods
B)services
C)leisure
D)formal education

Accepted Answer

Since leisure time is not traded in conventional markets, it is not measured in GDP even though leisure time is very important.

Question 16

The table below gives the quantities and prices for 2005 and 2015 for an economy that produces just two goods: sailboats and coconuts.  
  
For this economy that produces just sailboats and coconuts, and with 2005 as the base year, real GDP was approximately ________ times larger in 2015 than it was in 2005.
A)1.34
B)1.65
C)1.77
D)2.19

Accepted Answer

First note that in order to find real GDP, we must use the prices from the base year in both commutations. So real GDP in 2005 was: (10 sailboats × $500)+ (2,000 coconuts × $1)= $7,000. Real GDP in 2015 was (20 sailboats × $500)+ (2,400 coconuts × $1)= $12,400. Thus, real GDP in 2015 was 1.77 times larger ($12,400 / 7,000)than in 2005.

Question 17

A person 16 years or older who does not work and does not look for work is officially classified as:
A)employed.
B)unemployed.
C)chronically unemployed.
D)out of the labor force.

Accepted Answer

A person is considered to be out of the labor force if he or she did not work in the past week and did not look for work in the past four weeks.

Question 18

Each person who is 16 years or older is considered to be in one of the following categories:
A)employed, unemployed, or discouraged worker.
B)part-time worker, full-time worker, or unemployed.
C)part-time worker, full-time worker, or out of the labor force.
D)employed, unemployed, or out of the labor force.

Accepted Answer

For economic measurement purposes, workers are sorted into 3 categories: employed, unemployed, or out of the labor force.

Question 19

If two countries are economically identical except that citizens in one country have more leisure time, then the level of GDP:
A)will be higher in the country with more leisure time.
B)will be higher in the country with less leisure time.
C)will be the same in both countries.
D)will be greater than the level of economic well-being in each country.

Accepted Answer

Since leisure time is not traded in conventional markets, it is not measured in GDP even though leisure time is very important.

Question 20

GDP would be a better measure of economic well-being if it included:
A)the costs of education.
B)the total value of intermediate goods.
C)the market value of final goods.
D)the value of leisure.

Accepted Answer

Since leisure time is not traded in conventional markets, it is not measured in GDP even though leisure time is very important.

Quiz 17: Measuring Economic Activity: GDP and Unemployment

Peg's Manicure Manor did 4,000 sets of nails in 2015 and 4,500 sets of nails in 2016. The price of a set of nails was $20 in 2015 and $22 in 2016. If 2015 is the base year, Peg's contribution to real GDP in 2016 was and to nominal GDP in 2016 was .

GDP excludes important factors that affect people's well-being, such as the value of:

If you knew that two countries had the same level of real GDP per person, what additional piece of information would help you determine in which country people had a better standard of living?

Countries with high real GDP tend to have infant mortality rates and literacy rates than countries with low real GDP.

Although GDP is not the same as economic well-being, high levels of GDP are positively correlated with all of the following except:

A person 16 years or older who does not work, but is actively looking for work, is officially classified as:

Who from among the following would be counted as unemployed?

If two countries are economically identical except that there is significant air and water pollution in one, then the level of GDP:

One shortcoming of real GDP as an indicator of society's social well-being is that it fails to take into account the:

Who from among the following would be classified as out of the labor force?

Despite some problems with equating GDP with economic well-being, higher real GDP per person does imply greater economic well-being because it tends to be positively associated with:

Real GDP is not a perfect measure of economic well-being because it excludes the value of all of the following except:

A person 16 years or older who works part-time is officially classified as:

Using real GDP to compare the level of economic well-being in two countries may be misleading because the value of ________ contributes to economic well-being, but is excluded from real GDP.

A person 16 years or older who does not work and does not look for work is officially classified as:

Each person who is 16 years or older is considered to be in one of the following categories:

If two countries are economically identical except that citizens in one country have more leisure time, then the level of GDP:

GDP would be a better measure of economic well-being if it included: