Question 1

Determine in which spending category, if any, each of the following transactions would be recorded.
(A)Ford sells a Thunderbird from its inventory.
(B)Ford sells a Thunderbird that it produced this year to the state government.
(C)The city of Dallas purchases computer paper for its employees from a local firm.
(D)A business in Dallas purchases computer paper for its employees from a local firm.
(E)Your grandmother wins $10 million in the lottery.
(F)You purchase a newly constructed house.

Accepted Answer

The answer of Determine in which spending category, if any,...

Question 2

Answer the questions below:
(A)If a parent has to take the afternoon off from work to pick up his or her children from school and transport them to a friend's house, what happens to GDP?
(B)If the parent hires a nanny to pick the children up and transport them to a friend's house, what will happen to GDP?
(C)Are your answers to (A) and (B) the same? Explain.

Accepted Answer

The answer of Answer the questions below:
(A)If a parent has...

Question 3

Given the information in the table below for three consecutive years in the U.S. economy, calculate the missing data.

Accepted Answer

The answer of Given the information in the table below...

Question 4

Examine the following data for a hypothetical centrally planned economy that subsequently frees prices:  (A)Assume that higher education and cereal are the only goods and services produced in this economy. Calculate GDP under the controlled prices and under market prices, assuming the quantities do not change. Did government-set prices result in an under- or overvaluation of production on the whole?
(B)How do people value each good in relation to previously controlled prices?

Accepted Answer

The answer of Examine the following data for a hypothetical...

Question 5

GDP is unaffected by changes in the quality of a good or service.

Accepted Answer

GDP is affected by changes in the quality of a good or service through the concept of real GDP, which adjusts for changes in prices and quality. Real GDP is a more accurate measure of economic output than nominal GDP, which does not take into account changes in the value of money or changes in the quality of goods and services produced.

Question 6

Consider the following two scenarios for monthly inventories and sales for a company producing cereal. In both scenarios, the company's sales are the same.   In scenario A, the company maintains production at a constant level. In scenario B, the company adjusts production from month to month to try to match sales.
(A)Calculate the inventory investment in each month and resulting stock of inventory at the beginning of the following month for both scenarios.
(B)How does maintaining constant production affect the stock of inventory? Explain.

Accepted Answer

The answer of Consider the following two scenarios for monthly...

Question 7

Determine whether each of the following would be included in GDP, and explain why or why not.
(A)You buy a used car from a friend.
(B)You buy a used car at the local dealership.
(C)You are an at-home parent and spend your day cleaning house, cooking meals, and caring for the children.
(D)You hire a nanny to clean your house, cook your meals, and care for your children.

Accepted Answer

The answer of Determine whether each of the following would...

Question 8

Use the following data for an ice-cream vendor at a local fair:  
(A)Calculate the vendor's value added. 
(B)Profits are revenue minus costs. Capital income consists of profits, rents, and interest. Show that the value added equals capital income plus labor income paid by the vendor.
(C)Suppose that at a similar fair, the temperature is cooler and revenues fall to $1,500, but the prices of intermediate inputs, rental fees, and wages and salaries do not change. What happens to value added and profits in this case?

Accepted Answer

The answer of Use the following data for an ice-cream...

Question 9

The state of individual well-being affects the production of goods and services in the economy.

Accepted Answer

When individuals are in good health and experience positive emotions, they are more productive and creative. On the other hand, when they are unwell or unhappy, their ability to work, produce and innovate is compromised. Therefore, individual well-being has a direct impact on economic productivity.

Question 10

Which of the following would not be captured by a perfect measure of the production of goods and services in the economy?

Accepted Answer

A perfect measure of the production of goods and services in the economy, also known as Gross Domestic Product (GDP), only measures the monetary value of final goods and services produced within a country's borders during a specified period. It does not take into account non-monetary factors, such as a healthy life expectancy, or non-market activities, such as home production and the underground economy. Improvements in goods and services are captured in GDP through price movements and changes in quality.

Question 11

Suppose that the following data explain the economic activity in a country in the year 2010.  
Given these data, calculate the following:
(A)Inventory investment
(B)Net exports
(C)Gross domestic product
(D)Statistical discrepancy
(E)National saving
(F)Government saving
(G)Verify that national saving equals investment plus net exports.

Accepted Answer

The answer of Suppose that the following data explain the...

Question 12

To be included in GDP, an activity has to involve a market transaction.

Accepted Answer

This is true because GDP measures the value of goods and services produced within a country's borders, and market transactions are used to determine this value. Activities that do not involve market transactions, such as unpaid work or unpaid volunteer work, are not counted in GDP.

Question 13

Why are revisions of GDP inevitable? Why does it matter?

Accepted Answer

The answer of Why are revisions of GDP inevitable? Why...

Question 14

Please answer true or false and explain.
(A)A new technology is discovered that results in all new cars producing 50 percent less pollution. People are better off because the air they breathe is cleaner, and hence GDP will increase to reflect the fact that people are better off.
(B)A new technology is discovered that results in all new cars producing 50 percent less pollution. As a result, there is a reduction in the number of visits people make to the doctor to complain of breathing difficulties. People are better off because they are healthier, and hence GDP will increase to reflect the fact that people are better off.
(C)A new technology is discovered that results in all new cars producing 50 percent less pollution. The federal government offers all people owning cars built before 1980 a $1,000 rebate on the purchase of a new car in an attempt to remove polluting cars from the road. One thousand people accept the offer and buy new cars worth $25 million. GDP increases by the value of the cars sold, which is $25 million, and the total amount of the government expenditure on the rebate program, which is $1 million.

Accepted Answer

The answer of Please answer true or false and explain.
(A)A...

Question 15

There is no correlation between the decline in certain forms of pollution over the past 40 years and the increase in real GDP per capita.

Accepted Answer

Studies have shown that as economies grow and real GDP per capita increases, investments in cleaner technologies and more stringent environmental regulations often lead to a reduction in certain forms of pollution, indicating a correlation between economic growth and environmental improvement in many developed countries.

Question 16

List three points that need to be kept in mind when reading news stories about GDP.

Accepted Answer

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Question 17

Can real GDP per capita serve, by itself, as an adequate measure of individual well-being?

Accepted Answer

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Question 18

Suppose that, in response to a new government policy, some businesses are forced to go underground.
(A)How will this affect the measure of GDP?
(B)Will this change in GDP reflect a change in well-being?

Accepted Answer

The answer of Suppose that, in response to a new...

Question 19

Suppose that investment in the United States was about $130 billion and the trade deficit was $10 billion. How much was national saving in the United States? If the government budget surplus was $2 billion, how much total saving by consumers and businesses in the United States occurred?

Accepted Answer

The answer of Suppose that investment in the United States...

Question 20

GDP is a perfect measure of production because the government is able to account for all production of goods and services over the course of the year.

Accepted Answer

GDP is not a perfect measure of production because it only measures the monetary value of final goods and services produced within a country's borders. It does not account for informal or underground economic activity, non-monetary transactions, or negative externalities such as environmental degradation. Additionally, GDP does not capture the distribution of wealth or well-being of a country's citizens.

Quiz 6: Measuring the Production, Income, and Spending of Nations