Question 1

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

Accepted Answer

Increasing income tax rates can lead to more people working off the books to avoid higher taxes, thus increasing the size of the underground economy.

Question 2

Table 8-9
 
-Refer to Table 8-9.Suppose that the above table represents the goods and services produced in a very simple economy in 2013.Assume that steel is used as an input in the production of autos.Using that information,calculate GDP for the year 2013.

Accepted Answer

The answer of Table 8-9
 
-Refer to Table 8-9.Suppose that...

Question 3

Legalizing all forms of illegal activities

Accepted Answer

Legalizing all forms of illegal activities would increase GDP as now these activities would be a part of the formal economy and generate revenue through taxes. This would also reduce the size of the underground economy as more activities move into the formal sector.

Question 4

The U.S.work week has declined from 60 hours in 1890 to 40 hours today.The impact of the decline in working hours

Accepted Answer

The decrease in working hours has been accompanied by increases in productivity, which has enabled workers to produce the same amount of goods and services in less time. This, in turn, has led to an increase in leisure time and a higher quality of life for workers. While decreasing working hours may initially decrease GDP, in the long run, the increase in leisure time is likely to lead to increases in education, innovation, and other factors that contribute to economic growth. Therefore, the decrease in working hours has likely led to a decrease in U.S. GDP but an increase in the well-being of a typical working person in the U.S.

Question 5

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

Accepted Answer

Gross domestic product only takes into account production that occurs within the market economy, and therefore does not include the value of household production, which includes activities such as cooking, cleaning and childcare that are performed within households and not sold on the market.

Question 6

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 do not pay taxes to the government, which can lead to a loss of revenue for the government and reduce the funds available for public services and infrastructure development.

Question 7

The table below describes the value added in the production of a gallon of gasoline by each stage of production.(The values are hypothetical.)
Table 8-10
  a)What is the value added by each stage of production?
b)What is the total value added?
For simplicity,you can ignore the cost of the inputs for oil drilling.

Accepted Answer

The answer of The table below describes the value added...

Question 8

Table 8-7
 
-Refer to Table 8-7.Suppose that a simple economy produces only four goods and services: iPods,t-shirts,bottled water,and oranges.Calculate nominal GDP for this simple economy.

Accepted Answer

The answer of Table 8-7
 
-Refer to Table 8-7.Suppose that...

Question 9

Table 8-8
 
-Refer to Table 8-8.Suppose that a simple economy produces only four goods and services: sweaters,CDs,sugar,and soft drinks.Assume one half of the sugar is used in making the soft drinks and the other half of the sugar is purchased by households.Calculate nominal GDP for this simple economy.

Accepted Answer

The answer of Table 8-8
 
-Refer to Table 8-8.Suppose that...

Question 10

Which of the following is not a true statement about the impact of World War II on the U.S.economy?

Accepted Answer

The war time years were not a period of prosperity for U.S. consumers as resources were directed towards the war effort and rationing had to be imposed on items such as gasoline, rubber, and certain foods. Additionally, many able-bodied men were drafted into the military which caused labor shortages in many industries leading to higher unemployment rates.

Question 11

The Philippines and Vietnam have roughly the same size population.Suppose the GDP of the Philippines is $1,000 billion and the GDP of Vietnam is $10,000 billion.You should conclude

Accepted Answer

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

Question 12

Statistics on real GDP during World War II may give a misleading indication of whether World War II was a period of prosperity because

Accepted Answer

The increased production during World War II was mainly for military goods and not consumption goods. Therefore, real GDP may give a misleading indication of prosperity during the war because it does not reflect the overall well-being of citizens or their level of consumption. The focus on military goods also means that the increase in production may not have translated into a better standard of living for the average person.

Question 13

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

Accepted Answer

Decreasing government regulations on businesses can reduce the incentives for businesses to operate in the underground economy, as it becomes easier and potentially more profitable to operate within the legal framework.

Question 14

Which of the following statements is true?

Accepted Answer

GDP accounting rules indeed do not adjust for the environmental impact of production, including pollution. GDP measures the total value of all goods and services produced over a specific time period but does not deduct for negative externalities like pollution.

Question 15

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

Accepted Answer

The underground economy, which refers to unreported and illegal economic activities, is not included in official GDP calculations. Therefore, GDP understates the total production of goods and services.

Question 16

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

GDP measures the market value of goods and services produced within a country's borders. Bob has stopped working outside the home, so his employment is no longer contributing to GDP. The fact that he is now caring for his family does not count as a market transaction nor does it add to the production of goods or services in the economy. Therefore, the overall effect will be a decrease in GDP.

Question 17

A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements.This will

Accepted Answer

While an increase in the number of lawyers hired will contribute to an increase in GDP, the increase in divorce rates and the resulting need for lawyers suggests a decrease in overall well-being in the economy. Divorce can be emotionally and financially taxing, and an increase in divorce rates is often seen as a negative social indicator. Therefore, while GDP may increase, the overall impact on the economy's well-being is likely negative.

Question 18

Which of the following is likely to increase measured GDP?

Accepted Answer

Legalizing an activity such as growing and selling marijuana moves it from the informal or black market into the formal economy, where it is recorded and taxed, thus increasing the measured GDP. Activities like home day care, underreporting income, and doing one's own lawn maintenance either do not add to GDP or move activities out of the measured economy, thereby not increasing or even potentially decreasing measured GDP.

Question 19

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

Accepted Answer

Excluding the underground economy from measured GDP can cause errors in estimating GDP growth in the long run. The underground economy may constitute a significant portion of economic activity and excluding it may underestimate the true size of an economy. While the size of the underground economy varies by country, it is generally believed to be larger in developing countries. Transactions that occur in the underground economy are not typically included in the calculation of GDP, and income that is earned but not reported for tax purposes is not included in GDP.

Question 20

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

Accepted Answer

Recent estimates suggest that the size of the underground economy in the United States is around 8 percent of the measured GDP. This includes unreported income from both legal and illegal activities that contribute to the economy but are not captured in official statistics.

Quiz 8: GDP: Measuring Total Production and Income

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

Table 8-9 -Refer to Table 8-9.Suppose that the above table represents the goods and services produced in a very simple economy in 2013.Assume that steel is used as an input in the production of autos.Using that information,calculate GDP for the year 2013.

Legalizing all forms of illegal activities

The U.S.work week has declined from 60 hours in 1890 to 40 hours today.The impact of the decline in working hours

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

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

Table 8-7 -Refer to Table 8-7.Suppose that a simple economy produces only four goods and services: iPods,t-shirts,bottled water,and oranges.Calculate nominal GDP for this simple economy.

Which of the following is not a true statement about the impact of World War II on the U.S.economy?

The Philippines and Vietnam have roughly the same size population.Suppose the GDP of the Philippines is $1,000 billion and the GDP of Vietnam is $10,000 billion.You should conclude

Statistics on real GDP during World War II may give a misleading indication of whether World War II was a period of prosperity because

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

Which of the following statements is true?

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

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?

A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements.This will

Which of the following is likely to increase measured GDP?

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

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