Question 1

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 means they are not contributing to the revenue that the government needs to fund public goods and services. This can put additional strain on the government's budget and lead to a lack of funding for important initiatives such as education, health care, and infrastructure development.

Question 2

Legalizing all forms of illegal activities

Accepted Answer

Legalizing all forms of illegal activities would bring them into the formal economy, which would increase the size of the GDP. It would also reduce the size of the underground economy as these activities would no longer be conducted in secrecy.

Question 3

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 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 8-9
 
-Refer to Table 8-9.Suppose that...

Question 4

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 5

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 6

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

Accepted Answer

Household production, such as cooking meals or cleaning one's own home, is not included in GDP calculations because it is not sold in a market transaction. This omission leads to an understatement of the total production of final goods and services.

Question 7

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 for divorce settlements will increase the GDP as it contributes to the economy, but it will also decrease the well-being in the economy as it indicates an increase in divorce rates and potential negative impacts on individuals and families involved.

Question 8

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

Accepted Answer

Presently, GDP is not adjusted to compensate for the costs of environmental damage. This is a well-known limitation of GDP as a measure of economic welfare, as it does not take into account the negative externalities associated with economic growth, such as pollution and resource depletion. Some alternative measures, such as the Genuine Progress Indicator (GPI), attempt to incorporate these environmental and social costs into a more holistic measure of well-being.

Question 9

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

Accepted Answer

The underground economy, also known as the informal or shadow economy, involves economic activity that is not reported to the government for tax or regulatory purposes. This includes activities such as bartering, unreported income, and illegal activities. These activities are not included in GDP calculations, leading to an understatement of the total production of final goods and services.

Question 10

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 11

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 12

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 13

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 14

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 increased the well-being of a typical working person in the U.S. by providing them with more leisure time and reducing stress and fatigue. However, it has decreased U.S. GDP since the number of hours worked has decreased, resulting in lower output and productivity.

Question 15

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

When Bob stops working for Mary, it means that his contribution to the economy has decreased. GDP is the value of all goods and services produced within a country's borders in a given period. Since Bob is no longer providing any goods or services to the economy, the GDP will decrease.

Question 16

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.
Answer:
  a)The value added is the difference between the price the firm sells a good for and the price it paid other firms for the intermediate good.The firm that does the oil drilling sells the gallon of oil to the refinery for $0.75.Since we are assuming no other input costs for simplicity,the value added by the drilling firm is $0.75.The refinery processes the oil and then sells it to the transport company for $1.25.The refinery's value added is $0.50.The transport company sells the oil to the retail company for $1.85.The transport company's value added is $1.85 - $1.25 = $0.60.Finally,the retail gas station sells the gallon of gas for $3.65.The value added by the retail station is $1.80.
b)The total value added is found by summing the value added by each firm involved the production of the gallon of gas.The retail price is the same at this total of value added.
-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 Table 8-10
  a)What is the value...

Question 17

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

Accepted Answer

Pollution and environmental damage are considered negative externalities and are not accounted for in traditional GDP calculations. Including these measurements would decrease GDP values, as they reflect the cost of damage caused by economic growth.

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

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 20

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. This is because the size of the underground economy can be significant in some countries, and changes in its size can impact GDP growth rates.

Quiz 8: Gdp: Measuring Total Production and Income

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

Legalizing all forms of illegal activities

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 2016.Assume that steel is used as an input in the production of autos.Using that information,calculate GDP for the year 2016.

Which of the following is likely to increase measured GDP?

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

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

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

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

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

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

Which of the following statements is true?

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

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?

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

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

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 statements about the underground economy is true?