Question 1

Recessions are not associated with which of the following?

Accepted Answer

Recessions are usually associated with increased bankruptcies, falling profits and falling incomes. However, falling unemployment is not associated with recessions as job opportunities decline during economic downturns, leading to higher unemployment rates. In fact, rising unemployment is often a key indicator of a recession.

Question 2

Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a population of 100. Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150. What happened to the real GDP per person?

Accepted Answer

The answer of Suppose that twenty-five years ago a country...

Question 3

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person

Accepted Answer

Nominal GDP growth does not take into account changes in prices or population, so it does not give a complete picture of economic growth. To calculate real GDP per person, we need to adjust the nominal GDP growth rate for changes in prices (using the GDP deflator) and for changes in population. Real GDP per person growth equals nominal GDP growth minus inflation minus population growth. So the calculation is: 
Real GDP per person growth = 12% - 6% - 4% = 2%
Therefore, real GDP per person grew by less than 12%.

Question 4

The underground economy

Accepted Answer

The underground economy includes legal transactions that are unreported or unrecorded, such as small businesses that do not report all their earnings. This can result in a significant portion of the economy being unaccounted for in official measures of GDP. While criminal activity can be a part of the underground economy, it is not the only component. Developed nations typically have a smaller underground economy as a percentage of GDP due to more robust regulatory systems, while developing nations may have a larger underground economy due to factors such as corruption or limited access to formal employment opportunities.

Question 5

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that

Accepted Answer

While GDP does not measure everything that society values, it is still a useful measure of society's welfare because it measures a country's ability to purchase the inputs needed to produce goods and services that contribute to welfare. The government can use the money generated from GDP to fund programs that promote good health, education, recreation, and moral values. However, GDP alone cannot be used to fully assess the well-being of society, and other measures should be considered in conjunction with GDP.

Question 6

Suppose the government eliminates all environmental regulations and, as a result, the production of goods and services increases, but there is considerably more pollution. Based on this scenario, which of the following statements is correct?

Accepted Answer

GDP is a measure of the total value of goods and services produced within a country's borders, and it does not include environmental quality. Therefore, if environmental regulations were eliminated and production increased, the GDP would increase because it measures only the economic output and not the environmental externalities that come with it. This scenario suggests that economic growth and environmental quality are in conflict, and it highlights the importance of considering environmental concerns when promoting economic growth.

Question 7

A recession is always associated with

Accepted Answer

A recession is defined as a significant decline in economic activity, specifically in GDP (gross domestic product), for at least two consecutive quarters. Therefore, a recession is associated with a decline in real GDP.

Question 8

Much of macroeconomics attempts to explain

Accepted Answer

Macroeconomics is the study of the economy as a whole, including long-run growth and short-run fluctuations in real GDP. Options A, C, and D are all related to microeconomic analysis, which focuses on the behavior of individual markets and firms.

Question 9

Which of the following is a true statement?

Accepted Answer

International data consistently show a positive correlation between a country's GDP per capita and its citizens' standard of living.

Answer: B 
 This statement is false. While real GDP per capita may be similar between rich and poor countries, their standards of living can vary greatly due to factors such as income inequality, access to basic services, and quality of life.

Answer: C 
 The value of leisure time is not factored into the calculation of GDP per person. GDP per person reflects only market transactions, such as the value of goods and services produced and sold.

Answer: D 
 This statement is true. International data suggest that there is a close relationship between GDP per person and income inequality, as countries with higher levels of GDP per capita often have more evenly distributed income.

Question 10

GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is

Accepted Answer

GDP per person, also known as GDP per capita, takes into account the size of a country's economy relative to its population size. This provides a more accurate representation of the standard of living and economic well-being of individuals in a society than just looking at the overall GDP. GDP per capita also allows for comparisons between different countries and how their economies affect their citizens.

Question 11

GDP does not reflect

Accepted Answer

GDP only measures market transactions, so it does not account for non-monetary activities such as leisure or the value of goods and services produced at home (which are not sold in the market). Additionally, GDP does not take into account the quality of the environment, which can be negatively impacted by economic activity even if it increases GDP.

Question 12

Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year and thus enjoy less leisure per year). Based on this scenario, which of the following statements is correct?

Accepted Answer

GDP measures the value of goods and services produced in a country within a given time period, and it excludes leisure. Therefore, if the production of goods and services increases due to the elimination of holidays, GDP would definitely increase. The fact that GDP includes leisure is irrelevant in this scenario because leisure is not considered in the calculation of GDP.

Question 13

GDP is not a perfect measure of well-being; for example,

Accepted Answer

All of the above options are correct. GDP only measures the market value of goods and services produced in an economy, which means that it does not include the value of volunteer work or unpaid domestic work. Additionally, GDP does not address the distribution of income, which means that an economy with a high GDP may still have significant income inequality. Finally, GDP does not address environmental quality, which means that economic growth can occur at the cost of ecological sustainability.

Question 14

GDP per person tells us the income and expenditure of the

Accepted Answer

GDP per person, or per capita GDP, divides the gross domestic product by the population, providing an average economic output or income per person, which represents the average person in the economy.

Question 15

The information for 2008 in millions in the table below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of real GDP per person from highest to lowest?

Accepted Answer

The answer of The information for 2008 in millions in...

Question 16

Which of the following statements regarding GDP is correct?

Accepted Answer

GDP only measures the economic activity in terms of production and income, it does not consider negative externalities such as environmental damage.

Question 17

GDP is not a perfect measure of well-being; for example,

Accepted Answer

GDP measures the market value of goods and services produced within a country's borders, but it does not take into account factors such as the quality of the environment. This means that GDP may continue to rise even if the environment is being degraded, which can have negative long-term effects on well-being. While some non-market goods and services may have little value to society, others such as volunteering or caregiving are essential for social well-being and are not captured by GDP. The value of leisure is also not overemphasized in GDP, as it only counts the market value of leisure activities such as movie tickets or sports events, rather than the value of leisure time itself.

Question 18

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person?

Accepted Answer

Real GDP per person is calculated by adjusting nominal GDP for inflation and dividing it by population. Since prices have doubled, the inflation rate is 100%, which means that nominal GDP must be divided by 2 to get real GDP. Therefore, the real GDP per person increased by 50% (3/2), which is less than double the initial amount. So, the correct choice is B because real GDP per person increased, but it less than doubled.

Question 19

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?

Accepted Answer

The answer of The information below for 2008 in millions...

Question 20

Which of the following statements about recessions is true?

Accepted Answer

While there are some common characteristics of recessions, such as falling GDP and rising unemployment, there is no set rule or formula for declaring a recession. The overall health of the economy must be taken into consideration, and different organizations may have different criteria for identifying a recession.

Quiz 15: Measuring a Nations Income

Recessions are not associated with which of the following?

Suppose that twenty-five years ago a country had nominal GDP of $1,000, a GDP deflator of 200, and a population of 100. Today it has nominal GDP of $3,000, a GDP deflator of 400, and population of 150. What happened to the real GDP per person?

The underground economy

Many things that society values, such as good health, high-quality education, enjoyable recreation opportunities, and desirable moral attributes of the population, are not measured as part of GDP. It follows that

Suppose the government eliminates all environmental regulations and, as a result, the production of goods and services increases, but there is considerably more pollution. Based on this scenario, which of the following statements is correct?

A recession is always associated with

Much of macroeconomics attempts to explain

Which of the following is a true statement?

GDP is used as the basic measure of a society's economic well-being. A better measure of the economic well-being of individuals in society is

GDP does not reflect

Suppose the government passes a law eliminating holidays and, as a result, the production of goods and services increases because people work more days per year and thus enjoy less leisure per year) . Based on this scenario, which of the following statements is correct?

GDP is not a perfect measure of well-being; for example,

GDP per person tells us the income and expenditure of the

The information for 2008 in millions in the table below was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of real GDP per person from highest to lowest?

Which of the following statements regarding GDP is correct?

GDP is not a perfect measure of well-being; for example,

Suppose that over the last twenty-five years a country's nominal GDP grew to three times its former size. In the meantime, population grew by 40 percent and prices rose by 100 percent. What happened to real GDP per person?

The information below for 2008 in millions was reported by the World Bank. On the basis of this information, which list below contains the correct ordering of GDP per person from highest to lowest?

Which of the following statements about recessions is true?