Question 1

GDP per capita fully reflects the standard of living of a typical citizen of a country.

Accepted Answer

GDP per capita is just one measure of a country's economic performance and does not take into account other factors that affect the standard of living such as income inequality, healthcare, education, and social welfare programs.

Question 2

When Andrea was a poor college student,she changed the oil in her car herself.Now that she has a real job,she takes her car to her mechanic to have the oil changed.GDP is not affected by this change.

Accepted Answer

When Andrea changed the oil in her car herself, she contributed to GDP as she provided a service to herself. However, when she takes her car to the mechanic to have the oil changed, she is paying for a service and contributing to GDP. Therefore, the change from doing it herself to paying a mechanic does affect GDP.

Question 3

Child care provided by a nanny is not included in the GDP if the parents pay the nanny under the table.

Accepted Answer

GDP measures the value of all final goods and services produced within a country's borders in a given period, including legal market transactions. Payments made "under the table" are not reported to the government and thus are not included in GDP calculations.

Question 4

A disadvantage of using per capita GDP to measure the standard of living in a country is that it does not accurately reflect the differences in wealth between rich citizens and poor citizens in the same country.

Accepted Answer

Per capita GDP measures the average income of a country's citizens, but it does not take into account the distribution of wealth within the population. A country with a high per capita GDP may still have a significant wealth gap between its richest and poorest citizens, which can lead to disparities in standard of living.

Question 5

Because GDP excludes nonmarket transactions,the level of economic activity in a country is understated.

Accepted Answer

Nonmarket transactions such as unpaid household work, volunteer work, and illegal activities are not included in GDP, which leads to an understating of the true level of economic activity in a country.

Question 6

In the income approach to calculating GDP,net interest is the interest paid by businesses plus the interest they receive.

Accepted Answer

Net interest in the income approach to calculating GDP only includes the interest paid by businesses and excludes the interest they receive.

Question 7

GDP per capita is found by dividing GDP by population.

Accepted Answer

GDP per capita is calculated by dividing the GDP of a country by its population. Therefore, the statement is true.

Question 8

Sheila charges $100 to proof term papers for other college students.She does not declare this income on her tax return.Sheila is part of the informal economy.

Accepted Answer

The informal economy includes economic activities that are not reported to the government and therefore not taxed or monitored by any form of government. Sheila's undeclared income from proofing term papers falls into this category.

Question 9

In a country with income concentrated in the hands of a small group,median household income would be a better measure of the standard of living of a typical citizen than GDP per capita.

Accepted Answer

GDP per capita measures the average income of a country, which can be heavily influenced by a small group of high earners. Median household income, on the other hand, represents the income of the typical citizen in the middle of the income distribution, regardless of the extremes. In a country with income concentrated in the hands of a small group, median household income would provide a better indication of the standard of living for the typical citizen.

Question 10

The informal economy in the United States is estimated to be around 10% of GDP.

Accepted Answer

This estimate comes from a study conducted by the IMF in 2017. The informal economy includes activities such as unreported labor, unlicensed businesses, and under-the-table transactions.

Question 11

The Integrated Environmental and Economic Satellite Accounts are intended to take into account the environmental benefits or harmful effects of economic activity.

Accepted Answer

The Integrated Environmental and Economic Satellite Accounts incorporate information about both the environmental impacts and economic activity, in order to provide a more comprehensive understanding of the effects of economic growth and development. These accounts can be used to inform policy decisions and to promote sustainable development.

Question 12

An advantage of using GDP per capita to measure the standard of living in a country is that it declines if economic growth results in deterioration of the environment.

Accepted Answer

GDP per capita measures the average economic output per person and does not directly account for environmental degradation or the depletion of natural resources.

Question 13

The U.S.median household income in 2013 was about $65,000.

Accepted Answer

According to the U.S. Census Bureau, the median household income in 2013 was actually $52,250.

Question 14

If a country's GDP per capita is $86,000,then a typical married couple earns $172,000 per year.

Accepted Answer

GDP per capita is an average economic output per person, not a measure of typical earnings for specific households or couples.

Question 15

GDP includes the value of illegal transactions,which means the level of economic activity in a country is overstated.

Accepted Answer

GDP only includes legal economic transactions that are recorded and reported to the government. Illegal activities such as drug trafficking or black market transactions are not included in GDP calculations. Therefore, the level of economic activity in a country may actually be understated if significant illegal activity is present.

Question 16

China's GDP per capita would have been higher if not for the deterioration in the environment.

Accepted Answer

The answer of China's GDP per capita would have been...

Question 17

The rental income component in the income approach to calculating GDP includes the incomes of real estate agents and brokers.

Accepted Answer

The rental income component in the income approach to calculating GDP specifically refers to the income earned by property owners from the rental of their property. It does not include the incomes of real estate agents and brokers, as their earnings are considered part of the services sector.

Question 18

Joyce is an accountant.Sarah,her hair stylist,cuts and perms her hair in exchange for having her taxes done.This is an example of an economic transaction that is not included in the national income and product accounts.

Accepted Answer

The answer of Joyce is an accountant.Sarah,her hair stylist,cuts and...

Question 19

The informal economy in the United States is approximately 40% of GDP.

Accepted Answer

The informal economy in the United States is estimated to be around 10.7% of GDP according to a study from the Urban Institute.

Question 20

The proprietors' income component of the income approach to calculating GDP must be adjusted by an allowance to account for depreciating equipment.

Accepted Answer

The proprietors' income component of the income approach includes depreciation of equipment, but it is calculated using a different method than other components such as wages and profits. To account for this, an adjustment must be made to accurately reflect the amount of income generated by the use of equipment.

Quiz 5: Introduction to Macroeconomics