Question 1

Table 19-8
 $$\begin{array} { | l | c | c | } 
\hline { \text { Product } } & \text { Quantity } & \text { Price } \
\hline \text { Sweaters } & 50 & \$ 50.00 \
\hline \text { CDs } & 150 & 10.00 \
\hline \text { Sugar } & 600 & 1.00 \
\hline \text { Soft drinks } & 800 & 0.75 \
\hline
\end{array}$$
-Refer to Table 19-8.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 19-8
 \[\begin{array} { | l |...

Question 2

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

Accepted Answer

An increase in the number of lawyers hired to determine divorce settlements will increase GDP as it contributes to the overall economic activity. However, the increase is not a sign of a healthy economy because it is a result of a negative event such as divorce. Divorce is often emotionally and financially draining for individuals and families, and therefore, it decreases well-being in the economy.

Question 3

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 limit its ability to provide necessary public services. This can have a negative impact on the economy as a whole.

Question 4

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 5

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 would reveal the negative externalities associated with economic growth, ultimately reducing GDP values as the true cost of economic activity would be reflected.

Question 6

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 7

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

Accepted Answer

Gross domestic product only measures the production of final goods and services, not the production of goods and services consumed within households (e.g. cooking at home, childcare, cleaning). Therefore, household production is omitted from GDP calculation.

Question 8

Table 19-9
 $$\begin{array} { | l | c | c | } 
\hline \text { Product } & \text { Quantity } & \begin{array} { c } 
\text { Price per } \
\text { Unit }
\end{array} \
\hline \text { Steel } & 1,000 & \$ 100 \
\hline \text { iPods } & 5,000 & 200 \
\hline \text { Autos } & 500 & 25,000 \
\hline \text { Legal services } & 100 & 2,000 \
\hline
\end{array}$$
-Refer to Table 19-9.Suppose that the above table represents the goods and services produced in a very simple economy in 2016.Assume that steel is used as an input in the production of autos.Using that information,calculate GDP for the year 2016.

Accepted Answer

The answer of Table 19-9
 \[\begin{array} { | l |...

Question 9

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 10

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.

Question 11

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 19-10

$$\begin{array} { | l | l | l | } 
\hline \text { Stage of Production } & \text { Value of Sales } & \text { Value Added } \
\hline \text { Oil drilling } & 0.75 & \
\hline \text { Refining } & 1.25 & \
\hline \text { Shipping } & 1.85 & \
\hline \text { Retail sales } & 3.65 & \
\hline
\end{array}$$ 
 
-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

GDP measures the total output of a country, but it does not necessarily indicate the economic well-being of a typical individual. Other factors such as income distribution, cost of living, and quality of life also need to be taken into consideration to make a good comparison of the economic well-being of a typical individual in the two countries. Therefore, without additional information, it is not possible to make a good comparison.

Question 12

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 13

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 14

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 because it distorts the true size and composition of the economy. In some developing countries, the underground economy can amount to over 50% of measured GDP, making it even more important to consider in GDP calculations. Option A is incorrect because the underground economy in some developing countries can be quite significant. Option B is incorrect because most transactions in the underground economy are not included in the calculation of GDP. Option D is incorrect because income that is not reported for tax purposes is not included in the calculation of GDP.

Question 15

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 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

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

Accepted Answer

The underground economy, which includes illegal activities and transactions that are not reported to the government, is not included in official GDP calculations. This can lead to an understatement of the total production of final goods and services in the economy. Intermediate goods are not included in GDP because they are already accounted for in the value of the final goods and services they are used in producing. Inflation is accounted for by using real GDP, which adjusts for changes in prices. Exports are included in GDP as they represent production within the domestic economy that is sold to other countries.

Question 18

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 19

Legalizing all forms of illegal activities

Accepted Answer

Legalizing all forms of illegal activities would bring them into the legal economy, increasing economic activity and therefore increasing GDP. It would also reduce the size of the underground economy as previously illegal activities would now be regulated and taxed.

Question 20

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

Reducing work hours can lead to a decrease in GDP due to less labor input, but it often increases well-being by improving work-life balance and reducing stress.

Quiz 19: Gdp: Measuring Total Production and Income

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

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

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

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

Which of the following statements 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

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

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

Which of the following is likely to increase measured GDP?

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

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

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?

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

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

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