Question 1

Reference: Ref 6-4 (Table: Economic Data) Use the spending approach to national income accounting to calculate GDP for this country.

Accepted Answer

The answer of  Reference: Ref 6-4 (Table: Economic Data)...

Question 2

In the United States, the largest component of GDP is

Accepted Answer

Consumption is the largest component of GDP in the United States, accounting for approximately 70% of the total GDP. This includes all household spending on goods and services, such as food, housing, healthcare, and entertainment. Investment, government purchases, and net exports make up the remaining 30% of GDP.

Question 3

Maria normally earns $48,000 a year, in 12 installments of $4,000 each. From 2008 onwards, she has decided to work only nine months of the year. She also decided to go on a holiday and purchases a domestic airline ticket for $300. What is Maria's contribution to national GDP for the year 2008?

Accepted Answer

Maria's contribution to national GDP for the year 2008 is $36,300. This is because she worked for only nine months of the year, so she earned only $36,000 (9 x $4,000). She also spent $300 on a domestic airline ticket, which is included in her contribution to GDP.

Question 4

Private spending on tools, plant, and equipment that are used to produce future output is called

Accepted Answer

Private spending on tools, plant, and equipment that are used to produce future output is called investment.

Question 5

Which of the following are underground goods and services not counted in GDP?

Accepted Answer

The answer of Which of the following are underground goods...

Question 6

The most volatile component of GDP is

Accepted Answer

Investment is the most volatile component of GDP as it often fluctuates widely in response to changes in economic conditions, such as interest rates and overall confidence in the economy. Consumption, government spending, and net exports typically do not have as much volatility.

Question 7

Tim, a citizen of the United States living in Virginia, buys a computer that was made in South Korea by a Japanese firm. This transaction would affect the GDP of the United States in which way?

Accepted Answer

The purchase of the computer would be counted as an import in the United States, which would decrease net exports. However, since the computer was purchased by a US citizen, it would also count as consumption, which would offset the decrease in net exports and result in an overall unaffected GDP.

Question 8

Reference: Ref 6-4 (Table: Economic Data) Use the factor income approach to national income accounting to calculate GDP for this country.

Accepted Answer

The answer of  Reference: Ref 6-4 (Table: Economic Data)...

Question 9

Why do economists use different methods for splitting GDP?

Accepted Answer

Economists use different methods for splitting GDP because they provide opportunities for checking calculations, allow examination of the economy from multiple angles, and can answer different questions. Therefore, all options are correct.

Question 10

Why do some economists think that GDP may overestimate the actual level of economic activity in an economy?

Accepted Answer

GDP may overestimate economic activity because it does not subtract the negative impacts of pollution, which can degrade quality of life and economic sustainability.

Question 11

Which of the following answers counts as nonmarket production?

Accepted Answer

Each of the given options describe a form of nonmarket production, as they are not done for monetary compensation in a market transaction. A stay-at-home spouse cooking and cleaning, painting one's own garage, and cleaning up a local park are all examples of nonmarket production.

Question 12

Why is real GDP not seen as a perfect measure of production in an economy?

Accepted Answer

Real GDP does not count the underground economy or nonmarket production, making it an incomplete measure of production in the economy. While it is true that real GDP can contain accounting errors and is negatively adjusted for leisure but not for environmental impacts, these factors do not make it an imperfect measure on their own.

Question 13

The portion of women in the workforce has essentially doubled since 1950. What effect does this have on GDP?

Accepted Answer

The doubling of the portion of women in the workforce has increased the labor force participation rate, leading to an increase in productivity and GDP. Therefore, the GDP in 1950 is likely to be underestimated relative to today.

Question 14

The factor income approach to calculating GDP can be summarized as the summation of

Accepted Answer

The factor income approach measures GDP as the sum of wages, interest, rent, and profit earned by individuals and businesses in the production of goods and services. The other options list components of GDP, but not the factor incomes that make up GDP.

Question 15

The value of volunteer services is

Accepted Answer

Volunteer services are not included in GDP because they are not sold for a price in the market. However, they should be included because a service is being produced and provided, and their value can contribute to the well-being of society.

Question 16

Calculate the value of GDP from the information in this table.

Accepted Answer

To calculate GDP, we need to add the total value of all final goods and services produced within a country's borders.

From the table, we can see that: 
- The value of goods produced by Firm A = $5,000 
- The value of goods produced by Firm B = $3,000 
- The value of services produced by Firm C = $5,800

Therefore, the total value of all final goods and services produced = $5,000 + $3,000 + $5,800 = $13,800

Hence, the correct answer is B.

Question 17

You spent half the summer building a garage. You purchased tools that cost $350 and wood that cost $4,000. A contractor would charge $25 per hour for the 40 hours of work necessary to build the garage. After you build the garage, your mother gives you a present of $500 in stocks. As a result of these activities, how much does GDP rise for the current year?

Accepted Answer

The answer of You spent half the summer building a...

Question 18

Which of the following combinations contains only goods that can be counted towards consumption?

Accepted Answer

Consumption includes goods and services purchased by households for personal use, such as video game consoles, MP3 players, tuition, and cakes.

Question 19

Reference: Ref 6-4 (Table: Economic Data) What is the level of net exports in this country?

Accepted Answer

The answer of  Reference: Ref 6-4 (Table: Economic Data)...

Question 20

Theoretically, why should the expenditure and income approaches to calculating GDP give us the same results?

Accepted Answer

Every dollar spent is a dollar earned, so the expenditure and income approaches to calculating GDP should give us the same results.

Quiz 24: Asymmetric Information: Moral Hazard and Adverse Selection

Reference: Ref 6-4 (Table: Economic Data) Use the spending approach to national income accounting to calculate GDP for this country.

In the United States, the largest component of GDP is

Maria normally earns $48,000 a year, in 12 installments of $4,000 each. From 2008 onwards, she has decided to work only nine months of the year. She also decided to go on a holiday and purchases a domestic airline ticket for $300. What is Maria's contribution to national GDP for the year 2008?

Private spending on tools, plant, and equipment that are used to produce future output is called

Which of the following are underground goods and services not counted in GDP?

The most volatile component of GDP is

Tim, a citizen of the United States living in Virginia, buys a computer that was made in South Korea by a Japanese firm. This transaction would affect the GDP of the United States in which way?

Reference: Ref 6-4 (Table: Economic Data) Use the factor income approach to national income accounting to calculate GDP for this country.

Why do economists use different methods for splitting GDP?

Why do some economists think that GDP may overestimate the actual level of economic activity in an economy?

Which of the following answers counts as nonmarket production?

Why is real GDP not seen as a perfect measure of production in an economy?

The portion of women in the workforce has essentially doubled since 1950. What effect does this have on GDP?

The factor income approach to calculating GDP can be summarized as the summation of

The value of volunteer services is

Calculate the value of GDP from the information in this table.

Which of the following combinations contains only goods that can be counted towards consumption?

Reference: Ref 6-4 (Table: Economic Data) What is the level of net exports in this country?

Theoretically, why should the expenditure and income approaches to calculating GDP give us the same results?