Question 1

Legalizing all forms of illegal activities

Accepted Answer

Legalizing illegal activities would bring them into the formal economy and increase GDP. It would also reduce the size of the underground economy by eliminating the need for illegal activities to be conducted covertly.

Question 2

Emily is a writer.She buys pens and paper for $20 and writes a 500-page novel that she sells to a publishing company for $500,000.If the publisher prints 1 million copies that sell for $25 each,what is the contribution to GDP of Emily's novel?

Accepted Answer

The contribution to GDP of Emily's novel includes the value of the final product sold to the end consumer, which in this case is the million copies of the book sold for $25 each. The total revenue generated from the book sales is $25 million (1 million copies x $25 per copy). Therefore, the contribution to GDP of Emily's novel is $25 million, which includes the value of her inputs (pens and paper) as well as the value added by her labor and creativity in writing the novel.

Question 3

Which of the following statements about the underground economy is true?

Accepted Answer

Excluding underground economy production from measured GDP can cause errors in GDP growth estimates in the long run as it underestimates the actual economic activity occurring in the country. The other statements are false. The underground economy in developing countries can amount to a significant portion of measured GDP, most transactions in the underground economy are not included in GDP calculations, unreported income is not included in GDP calculations, and the growth of the underground economy in Canada is not continually increasing relative to measured GDP.

Question 4

Gross domestic product understates the total production of final goods and services because of the omission of

Accepted Answer

The underground economy, or black market, includes economic activity that is not reported to the government and therefore not included in GDP calculations. This can include illegal activities such as drug dealing or unreported income from legal activities such as under-the-table work.

Question 5

The size of the underground economy would tend to decrease if the government of a country

Accepted Answer

The answer of The size of the underground economy would...

Question 6

Describe briefly how the final value of an iPhone must be equal to the sum of incomes generated by the production of the iPhone.

Accepted Answer

The answer of Describe briefly how the final value of...

Question 7

The informal sector can be a significant drag on the economies of developing countries because the firms in the informal sector

Accepted Answer

Firms in the informal sector usually do not pay taxes to the government, which can lead to a significant loss of revenue for the government. This loss of revenue can have negative effects on the economy, such as reduced government spending on infrastructure and public services.

Question 8

Government spending on subsidies is included in government consumption when calculating GDP because it results in the production of new goods and services.

Accepted Answer

Government spending on subsidies is not included in government consumption when calculating GDP because subsidies are transfers to firms or individuals and do not directly result in the production of new goods and services.

Question 9

Table 4.9
 
-Refer to Table 4.9.Suppose that the above table represents the goods and services produced in a very simple economy in 2015.Assume that steel is used as an input in the production of autos.Using this information,calculate GDP for the year 2015.

Accepted Answer

The answer of Table 4.9
 
-Refer to Table 4.9.Suppose that...

Question 10

The size of the underground economy would tend to increase if the government of a country

Accepted Answer

Increased income tax rates can lead to a larger underground economy as individuals and businesses may seek to evade taxes, thus conducting more transactions off the books.

Question 11

The circular flow of income shows that GDP can be measured as the sum of wages,interest,rent,and profits received by households or total expenditures on goods and services by households,firms,government,and the rest of the world.

Accepted Answer

The circular flow of income illustrates that income flows from households to firms through the factor market (wages, interest, rent, and profits) and from firms to households through the product market (expenditures on goods and services). Therefore, GDP can be measured either as total income (sum of wages, interest, rent, and profits received by households) or as total expenditures (sum of household, firm, government, and rest of the world expenditure on goods and services).

Question 12

Which of the following statements is true?

Accepted Answer

GDP accounting rules indeed do not adjust for environmental pollution. GDP measures the total value of all goods and services produced over a specific time period but does not deduct for environmental degradation or depletion of natural resources.

Question 13

When reporting GDP using the expenditure approach Statistics Canada divides its statistics into four major categories.List the categories of expenditures and define each one.

Accepted Answer

The answer of When reporting GDP using the expenditure approach...

Question 14

Why do we subtract import spending from total expenditures?

Accepted Answer

The answer of Why do we subtract import spending from...

Question 15

Debbie makes porcelain plates in her home and sells them to the Opus gallery.She spent $400 last month on supplies and made 50 plates.She sold the plates to the gallery at $25 per plate.The gallery sells all the plates for $40 each.For all of the 50 plates,what is Debbie's total value added? For all the 50 plates,what is the gallery's total value added?

Accepted Answer

The answer of Debbie makes porcelain plates in her home...

Question 16

Gross domestic product understates the total production of final goods and services because of the omission of

Accepted Answer

GDP only measures the value of goods and services produced by businesses and governments. It does not include the value of goods and services produced within households, such as cooking, cleaning or child-rearing.

Question 17

If Gladys sells her 1998 Jeep Cherokee for $3,500 in 2015,the sale of her car contributes $3,500 to 2015 GDP.

Accepted Answer

The sale of a used car does not contribute to GDP as it is not included in the current production of goods and services. GDP only includes the value of goods and services produced within a designated time period, typically a year.

Question 18

Suppose Bob works for Mary as a proofreader.Mary and Bob fall deeply in love,marry and have eight children.Bob stops working for Mary in order to care for the children.What will be the effect on GDP?

Accepted Answer

When Bob stops working for Mary to care for their children, his work as a caregiver is not counted in GDP because it is unpaid household work. This reduces the measured economic activity since his previous paid work as a proofreader contributed to GDP.

Question 19

The Philippines and Vietnam have roughly the same size population.Suppose the GDP of the Philippines is $1 trillion and the GDP of Vietnam is $10 trillion.You should conclude

Accepted Answer

The answer of The Philippines and Vietnam have roughly the...

Question 20

Recent estimates put the size of the underground economy in Canada at ________ of measured GDP.

Accepted Answer

Recent estimates suggest that the size of the underground economy in Canada is approximately 2.3 percent of the measured GDP. This reflects economic activities that are not captured in official statistics, including both legal activities that are not reported to avoid taxes and regulations, and illegal economic activities.

Quiz 4: GDP: Measuring Total Production and Income

Legalizing all forms of illegal activities

Emily is a writer.She buys pens and paper for $20 and writes a 500-page novel that she sells to a publishing company for $500,000.If the publisher prints 1 million copies that sell for $25 each,what is the contribution to GDP of Emily's novel?

Which of the following statements about the underground economy is true?

Gross domestic product understates the total production of final goods and services because of the omission of

The size of the underground economy would tend to decrease if the government of a country

Describe briefly how the final value of an iPhone must be equal to the sum of incomes generated by the production of the iPhone.

The informal sector can be a significant drag on the economies of developing countries because the firms in the informal sector

Government spending on subsidies is included in government consumption when calculating GDP because it results in the production of new goods and services.

Table 4.9 -Refer to Table 4.9.Suppose that the above table represents the goods and services produced in a very simple economy in 2015.Assume that steel is used as an input in the production of autos.Using this information,calculate GDP for the year 2015.

The size of the underground economy would tend to increase if the government of a country

The circular flow of income shows that GDP can be measured as the sum of wages,interest,rent,and profits received by households or total expenditures on goods and services by households,firms,government,and the rest of the world.

Which of the following statements is true?

When reporting GDP using the expenditure approach Statistics Canada divides its statistics into four major categories.List the categories of expenditures and define each one.

Why do we subtract import spending from total expenditures?

Gross domestic product understates the total production of final goods and services because of the omission of

If Gladys sells her 1998 Jeep Cherokee for $3,500 in 2015,the sale of her car contributes $3,500 to 2015 GDP.

Suppose Bob works for Mary as a proofreader.Mary and Bob fall deeply in love,marry and have eight children.Bob stops working for Mary in order to care for the children.What will be the effect on GDP?

The Philippines and Vietnam have roughly the same size population.Suppose the GDP of the Philippines is $1 trillion and the GDP of Vietnam is $10 trillion.You should conclude

Recent estimates put the size of the underground economy in Canada at ________ of measured GDP.