Question 1

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.

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 2

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

Accepted Answer

The answer of If two countries are identical except that...

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?

Accepted Answer

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

Question 4

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

Accepted Answer

The level of GDP refers to the total value of goods and services produced in a country during a given period of time. The amount of leisure time that citizens have does not directly affect the level of GDP. Therefore, if two countries are identical in every aspect except for the amount of leisure time, their level of GDP should be the same.

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:

Accepted Answer

High levels of GDP are generally associated with better health care, education and living standards, leading to longer life expectancies, higher rates of literacy, and higher material standards of living. However, high GDP levels may also be associated with higher levels of pollution and environmental degradation, which can contribute to higher rates of infant mortality. Therefore, D is the correct choice as it is the only option that is not positively correlated with high GDP levels.

Question 6

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

Accepted Answer

Non-market production, such as unpaid household work, volunteer work, and informal economy activities, are not included in GDP. However, these activities contribute to the well-being of society and cannot be measured by GDP alone. Therefore, GDP is said to be an incomplete measure of social well-being.

Question 7

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

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 8

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:

Accepted Answer

Higher real GDP per person tends to be positively associated with better education, health, and life expectancy, which are all factors that contribute to economic well-being. The other choices listed (A, C, and D) are all factors that can have negative effects on economic well-being.

Question 9

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

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 10

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

Accepted Answer

GDP only measures monetary transactions in the market and does not take into account non-market activities such as leisure time. Thus, it excludes an essential element of people's well-being. The other options - government purchases of goods and services, services purchased by households, and goods produced domestically but sold to foreigners - are all counted in GDP as part of the country's output and expenditure.

Quiz 4: Macroeconomics: the Birds-Eye View of the Economy