Question 1

Some of the production of an economy creates pollution.As a result:
A)nominal GDP is greater than real GDP.
B)real GDP is greater than nominal GDP.
C)GDP tends to understate social welfare.
D)GDP tends to overstate social welfare.

Accepted Answer

GDP only measures economic activity and not the negative externalities like pollution. Therefore, GDP tends to overstate social welfare as it does not account for the negative effects of pollution on society.

Question 2

In 2001, in calculation of the implicit price index, Statistics Canada switched from fixed based price index method to a chain-weighted index.The main reason for this was:
A)to avoid complex calculation of the fixed based price index.
B)to better represent the weight of each category especially the information technology sector.
C)to avoid underestimation of the GDP growth, due to the rapid growth in the information technology sector.
D)to be able to use the relatively constant weights for the items in the GDP year after year.

Accepted Answer

The chain-weighted index better represents the weight of each category, especially the information technology sector, which was growing rapidly at the time.

Question 3

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:
A)public transfer payments to households.
B)the consumption of fixed capital.
C)intermediate goods.
D)the underground economy.

Accepted Answer

GDP does not account for the value of output produced in the underground economy, which includes illegal activities and unreported income. This can result in an underestimation of the actual productive activity in the economy.

Question 4

GDP tends to overstate economic well-being because it takes into account:
A)improvements in product quality over time.
B)expenditures undertaken to correct pollution.
C)illegal activities of individuals and businesses.
D)nonmarket activities, such as the productive work of homemakers.

Accepted Answer

The answer of GDP tends to overstate economic well-being because...

Question 5

The gross domestic product of Canada measures aggregate output produced:
A)within Canada's borders.
B)by all Canadian companies.
C)by all Canadian citizens only.
D)by Canadian companies and citizens only.

Accepted Answer

The gross domestic product (GDP) of Canada measures aggregate output produced within Canada's borders. This means that it includes all goods and services produced within Canada, regardless of whether they are produced by Canadian companies or citizens. Therefore, choice A is the best answer.

Question 6

Environmental pollution is accounted for in:
A)GDP.
B)DI.
C)PI.
D)None of these.

Accepted Answer

Environmental pollution is not accounted for in any of the mentioned economic indicators (GDP, DI, PI) as these indicators only focus on monetary transactions and do not take into account the negative externalities of pollution. However, there are alternative indicators such as the Genuine Progress Indicator (GPI) and the Ecological Footprint that attempt to account for environmental degradation.

Question 7

The GDP tends to:
A)overstate economic welfare because it does not include certain non-market activities such as the productive work of housewives.
B)understate economic welfare because it includes expenditures undertaken to offset or correct pollution.
C)understate economic welfare because it does not take into account increases in leisure.
D)overstate economic welfare because it does not reflect improvements in product quality.

Accepted Answer

The answer of The GDP tends to:
A)overstate economic welfare because...

Question 8

GDP tends to overstate economic well-being because it takes into account:
A)all of the illegal activities conducted by organized crime in the economy.
B)spending on intermediate goods that are used to produce final goods.
C)health care costs related to the consumption of products with adverse health effects.
D)the personal labour time that car owners spend working on car repairs and maintenance of their vehicles.

Accepted Answer

GDP includes spending on health care costs related to adverse health effects, which does not necessarily reflect an improvement in economic well-being.

Question 9

GDP data are criticized as being inaccurate measures of economic welfare because:
A)they do not take into account changes in the amount of leisure.
B)they do not take into account changes in product quality.
C)they do not take into account the adverse effects of economic activity on the environment.
D)all of these.

Accepted Answer

GDP data do not take into account changes in the amount of leisure or changes in product quality, and they also do not take into account the adverse effects of economic activity on the environment. Therefore, D is the correct choice.

Question 10

GDP excludes most non-market transactions.Therefore, GDP tends to:
A)underestimate the rate of inflation in the economy.
B)overestimate the rate of inflation in the economy.
C)overestimate the amount of production of the economy.
D)underestimate the amount of production in the economy.

Accepted Answer

GDP only considers market transactions and excludes non-market transactions such as household production, which can be significant. Therefore, GDP tends to underestimate the amount of production in the economy.

Question 11

Gross domestic product is what type of measure?
A)Monetary
B)Fiscal
C)Physical
D)Cash

Accepted Answer

Gross domestic product (GDP) is a monetary measure of the market value of all final goods and services produced within a country in a given period of time.

Question 12

The growth of GDP may understate changes in the economy's well-being over time if the:
A)distribution of income becomes increasingly unequal.
B)quality of products and services improves.
C)environment deteriorates because of pollution.
D)amount of leisure decreases.

Accepted Answer

GDP growth may understate well-being if the quality of products and services improves, as GDP measures quantity but not improvements in quality, which can enhance well-being without being reflected in GDP figures.

Question 13

Suppose a nation's nominal GDP was $972 billion in 2017 and the general price index was 90 in 2017.To make the value of GDP in 2017 comparable with the value of GDP in the base year, the value of GDP in 2017 must be:
A)adjusted downward to $678 billion.
B)deflated to $896 billion.
C)inflated to $1,080 billion.
D)deflated to $1,080 billion.

Accepted Answer

The answer of Suppose a nation's nominal GDP was $972...

Question 14

Gordon James is a person who sells narcotics "on the street." This type of illegal activity:
A)would be considered double counting in calculating GDP.
B)is estimated and included in GDP figures.
C)is excluded from GDP figures.
D)causes GDP to be overstated.

Accepted Answer

Illicit activities such as drug dealing are not included in the calculation of GDP as they are not legal and do not contribute to the production of goods and services. Therefore, they are excluded from GDP figures.

Question 15

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result:
A)real GDP will rise more rapidly than nominal GDP.
B)GDP will tend to increasingly understate the level of output through time.
C)GDP will tend to increasingly overstate the level of output through time.
D)the accuracy of GDP will be unaffected through time.

Accepted Answer

The underground economy operates outside the legal framework and is not included in official GDP calculations. As it grows, it will increasingly understate the level of output in the official GDP figures, leading to a growing gap between actual economic activity and reported GDP.

Question 16

Historically, real GDP has increased less rapidly than nominal GDP because:
A)price indices have not reflected improvements in product quality.
B)the general price level has increased.
C)technological progress has resulted in more efficient production.
D)the general price level has declined.

Accepted Answer

Nominal GDP is measured using current prices, so it increases with inflation, while real GDP is adjusted for inflation, reflecting only actual growth in volume of goods and services.

Question 17

GDP tends to underestimate the productive activity in the economy because it excludes:
A)spending by the government on military goods.
B)spending by businesses to reduce the level of pollution.
C)the work done by construction companies to remodel homes.
D)the personal labour time homeowners spend on home repairs.

Accepted Answer

GDP only measures production that is exchanged in the market, so it excludes the value of unpaid work or "do-it-yourself" activities. Therefore, personal labor time homeowners spend on home repairs is not included in GDP.

Question 18

GDP excludes:
A)the market value of household production.
B)the production of illegal goods.
C)off-the-books production.
D)all of the above.

Accepted Answer

GDP only counts market production, so it excludes household production (A) and off-the-books production (C). It also excludes the production of illegal goods (B) because illegal goods are not counted as part of the market economy. Therefore, all of the above choices are excluded from GDP.

Question 19

Refer to the data below and using year 1 as the base year, the real GDP in year 4 was approximately: 
A)$3,989 billion.
B)$3,562 billion.
C)$3,774 billion.
D)$3,494 billion.

Accepted Answer

The answer of Refer to the data below and using...

Question 20

The Chain-weighted index links each year to the previous year through:
A)the use of nominal GDPs in prior years.
B)the use of both the prior year prices and current year prices.
C)the use of real GDPs in prior years.
D)the use of base year implicit price index.

Accepted Answer

The chain-weighted index uses both the prior year prices and current year prices to calculate growth rates, allowing for a more accurate reflection of changes in the economy by accounting for shifts in consumption patterns and relative prices.

Quiz 7: B: Measuring the Economys Output

Some of the production of an economy creates pollution.As a result:

In 2001, in calculation of the implicit price index, Statistics Canada switched from fixed based price index method to a chain-weighted index.The main reason for this was:

GDP tends to underestimate the productive activity in the economy because it excludes the value of output from:

GDP tends to overstate economic well-being because it takes into account:

The gross domestic product of Canada measures aggregate output produced:

Environmental pollution is accounted for in:

The GDP tends to:

GDP tends to overstate economic well-being because it takes into account:

GDP data are criticized as being inaccurate measures of economic welfare because:

GDP excludes most non-market transactions.Therefore, GDP tends to:

Gross domestic product is what type of measure?

The growth of GDP may understate changes in the economy's well-being over time if the:

Suppose a nation's nominal GDP was $972 billion in 2017 and the general price index was 90 in 2017.To make the value of GDP in 2017 comparable with the value of GDP in the base year, the value of GDP in 2017 must be:

Gordon James is a person who sells narcotics "on the street." This type of illegal activity:

Assume that the size of the underground economy increases both absolutely and relatively over time.As a result:

Historically, real GDP has increased less rapidly than nominal GDP because:

GDP tends to underestimate the productive activity in the economy because it excludes:

GDP excludes:

Refer to the data below and using year 1 as the base year, the real GDP in year 4 was approximately:

The Chain-weighted index links each year to the previous year through: