Question 1

Increases in real GDP would overstate the increase in the well-being of a country over time if,over that time period,the

Accepted Answer

Increases in real GDP would overstate the increase in the well-being of a country if the average hours worked per week increased. This is because while GDP might rise due to more work being done, the additional working hours could lead to a decrease in leisure time and potentially increase stress, not necessarily reflecting an actual improvement in the overall well-being of the population.

Question 2

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 3

Developing countries with large informal sectors tend to have firms that invest less in capital equipment.

Accepted Answer

Informal sectors in developing countries are characterized by a lack of formal structures and regulations, limited access to credit and investment, and low productivity. As a result, firms operating in these sectors tend to have lower profits and limited resources for investment in capital equipment.

Question 4

Even though it is generally true that the more goods and services people have,the better off they are,GDP provides only a rough measure of well-being.Assuming language is not an issue,what other factors besides GDP might you consider when deciding where to live and work?

Accepted Answer

The answer of Even though it is generally true that...

Question 5

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

Accepted Answer

The increase in hiring lawyers to determine divorce settlements will increase GDP as it is counted as a service transaction. However, it will decrease well-being in the economy as divorce itself is often a difficult and emotional process for the individuals involved.

Question 6

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.

Question 7

Increases in real GDP would understate the well-being of a country over time if,over that time period,the

Accepted Answer

The answer of Increases in real GDP would understate the...

Question 8

If GDP calculations included measurements of pollution and environmental damage,GDP values would most likely be

Accepted Answer

Including measurements of pollution and environmental damage in GDP calculations would result in lower GDP values due to the negative impact of these factors on the economy. For example, the cost of cleaning up pollution or the loss of natural resources would be subtracted from the GDP calculation, leading to a lower overall value.

Question 9

Legalizing all forms of illegal activities

Accepted Answer

Legalizing illegal activities would bring them into the formal economy, increasing GDP. It would also reduce the size of the underground economy as illegal activities would no longer be conducted covertly.

Question 10

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 11

Real GDP per capita is calculated by dividing the value of real GDP for a country by the country's adult population.

Accepted Answer

Real GDP per capita is calculated by dividing the value of real GDP for a country by the total population, not just the adult population.

Question 12

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 decline in working hours has increased the well-being of a typical working person in the U.S. by providing more leisure time, reducing stress and fatigue, and improving work-life balance. However, it has also decreased U.S. GDP as fewer hours worked means less output produced. Nonetheless, the benefits to well-being are seen as outweighing the costs to GDP.

Question 13

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, causing a significant loss of potential revenue for the economy.

Question 14

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 focused on military goods, not consumption goods, so the statistics on real GDP may not accurately reflect the prosperity of the American people during the war.

Question 15

The underground economy the informal sector can be a significant drag on the economies of developing countries.Why are firms in the informal sector often less efficient than firms in the formal sector?

Accepted Answer

The answer of The underground economy the informal sector can...

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

If income is unequally distributed in an economy,increases in GDP may not raise well-being in an economy.

Accepted Answer

Unequal income distribution means that a small group of people are benefitting from the increase in GDP while the majority of the population is not. Therefore, despite the growth in GDP, many people may still be living in poverty and experiencing low levels of well-being.

Question 18

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

Accepted Answer

Excluding underground economy production from measured GDP does cause errors in GDP growth estimates in the long run because a significant portion of economic activity is not accounted for, leading to an inaccurate representation of the true size of the economy. A is false as the amount of underground economy varies among developing countries. B is false as most transactions in the underground economy are not reported and therefore not included in GDP calculations. D is false as income that is not reported for tax purposes is not included in the calculation of GDP.

Question 19

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. While production and GDP increased, rationing and shortages meant that many consumer goods were in short supply and prices were high. The U.S. government also implemented price controls to combat inflation, which further restricted access to goods for consumers.

Question 20

Presently,GDP is ________ to compensate for the costs of environmental damage.

Accepted Answer

GDP is not adjusted to compensate for the costs of environmental damage. This means that the GDP does not reflect the negative impact of economic activities on the environment, such as pollution or depletion of natural resources. It is important to note that this is a limitation of GDP as a measure of economic well-being, as it does not account for the long-term sustainability of economic growth.

Quiz 19: GDP: Measuring Total Production and Income