Question 1

The equation for GDP using the expenditure approach is:

Accepted Answer

The expenditure approach to calculating GDP is GDP = Consumption + Investment + Government Purchases + Exports - Imports, which accounts for net exports (exports minus imports).

Question 2

In macroeconomics, underground activities include:

Accepted Answer

Underground activities in macroeconomics refer to economic activities that are not reported to the government and therefore not included in official statistics. This includes illegal activities (A) and non-market transactions (C), which are not captured in GDP calculations. Mining (B) is a legal and market-based activity, so it does not fall under underground activities.

Question 3

From Application 1, Wal- Mart's 2008 value added was roughly equal to the GDP of _______, the _______ largest economy in the world.

Accepted Answer

B

Question 4

The traditional definition of a recession is a decline in real GDP lasting for

Accepted Answer

The traditional definition of a recession is a decline in real GDP for at least two consecutive quarters.

Question 5

Suppose that an economy is experiencing continuously rising prices. If 2000 is the base year, then the real GDP in 2009 is _______ than the nominal GDP.

Accepted Answer

Continuously rising prices imply inflation, which means that the prices in 2009 will be higher than in 2000. Thus, nominal GDP (measured in current prices) will be higher than real GDP (measured in constant prices), making real GDP less than nominal GDP.

Question 6

Recall Application 3, "The Links Between Self- Reported Happiness and GDP," to answer the following questions:
-According to the Application 3, self- reported levels of happiness among individuals in the U.S. have

Accepted Answer

The application suggests that despite increasing per capita incomes over the past 30 years, self-reported levels of happiness among individuals in the U.S. have decreased.

Question 7

In 1929- 1933, the U.S. experienced unemployment rates exceeding _______.

Accepted Answer

During the Great Depression, which lasted from 1929 to 1933, the unemployment rate in the U.S. reached a high of about 25 percent. This means that about one in four Americans were out of work during this period, causing widespread economic hardship and social unrest. While the exact numbers and impact of the Great Depression varied across different regions and demographics, it is widely considered to be one of the most severe economic crises in modern history.

Question 8

Real GDP equals nominal GDP when:

Accepted Answer

Nominal GDP is calculated using the current year's prices, while real GDP is calculated using constant prices from a base year. When the current year and the base year are the same, the prices used to calculate nominal and real GDP are equal, resulting in the two measures being the same.

Question 9

The concerns of macroeconomics include all of the following except:

Accepted Answer

The structure of the U.S. steel industry is a concern of microeconomics, which focuses on individual industries and markets, rather than the overall economy. The concerns of macroeconomics include consumer prices, gross domestic output, and the unemployment rate.

Question 10

From World War II until 2008, the U.S. has experienced:

Accepted Answer

The U.S. has not experienced any depressions since World War II. There have been economic recessions and downturns, but not depressions.

Question 11

If net investment is negative, the capital stock has _______ ; if net investment is positive, the capital stock has _______ .

Accepted Answer

Negative net investment means that the amount of investment in new capital goods (such as machinery or equipment) is less than the amount of depreciation of existing capital stock. This leads to a decrease in the overall capital stock. Positive net investment means that the amount of investment is greater than the amount of depreciation, leading to an increase in the overall capital stock.

Question 12

Which of the following would be included in GDP?

Accepted Answer

The broker's fee is a service provided in the current period and is included in GDP as it represents the value of services produced.

Question 13

If a power plant that pollutes the air produces $10 million in electricity. It the pollution causes a decline of $100 million to the value of the air we breathe, then this activity will cause a/an in real GDP and a/an _______ in social welfare.

Accepted Answer

Real GDP will increase because the production of electricity is counted as an economic output. However, social welfare will decrease due to the negative externality of pollution, which reduces the value of the air and overall well-being.

Question 14

When calculating GDP, exports are _______ and imports are _______.

Accepted Answer

When calculating GDP, exports are added to the calculation because they represent spending on domestically-produced goods that was not already counted in the calculation. On the other hand, imports are subtracted from the calculation because they represent spending on goods that were produced outside of the country and thus should not be included in the domestic GDP calculation.

Question 15

The most severe decline in output in U.S. history took place during:

Accepted Answer

The 1929-1933 period was the Great Depression, during which the U.S. experienced the most severe decline in output in its history. The other periods listed were also times of economic recession, but none were as severe as the Great Depression.

Question 16

In factor markets:

Accepted Answer

In factor markets, households supply the different factors of production such as labor, land, capital, and entrepreneurship, which are in turn demanded by firms to produce goods and services. Therefore, choice A is the correct answer.

Question 17

If no foreign companies produce in a country, but many of the country's companies produce abroad, then it is probably true:

Accepted Answer

GNP includes the value of goods and services produced by a country's residents, regardless of where they are located, while GDP includes the value of goods and services produced within a country's borders. If many of the country's companies produce abroad, their production contributes to GNP but not GDP, making GNP exceed GDP.

Question 18

If you take a walk in the park during your coffee break, this activity _______ the measurement of real GDP and _______ social welfare.

Accepted Answer

Taking a walk in the park during a coffee break does not involve any monetary transactions, so it does not directly affect the measurement of real GDP. However, it can have a positive impact on social welfare by promoting physical and mental health, reducing stress, and improving overall well-being.

Question 19

Suppose that net investment in 2009 was $360 billion and depreciation was $30 billion. Gross investment in 2009 was:

Accepted Answer

Gross investment can be calculated by adding net investment and depreciation. Therefore, gross investment in 2009 would be:

Gross investment = Net investment + Depreciation
Gross investment = $360 billion + $30 billion
Gross investment = $390 billion

Therefore, the answer is A) $390 billion.

Question 20

_______ is commonly defined as six consecutive months of declining real GDP.

Accepted Answer

A recession is commonly defined as six consecutive months of declining real GDP. A trough is the lowest point of a recession, while a peak is the highest point of an economic expansion.

Quiz 5: Measuring a Nations Production and Income