Measuring a Nation’s Income 5771
5.
GDP does not reflect
a.
the value of leisure.
b.
the value of goods and services produced at home.
c.
the quality of the environment.
d.
All of the above are correct.
6.
Which of the following statements regarding GDP is correct?
a.
GDP includes factory production, but not any harm that may be inflicted on the environment.
b.
GDP accounts for all activities taking place outside markets.
c.
GDP provides detailed information about the distribution of income.
d.
GDP is a good measure of economic well-being for all purposes.
7.
GDP is not a perfect measure of well-being; for example,
a.
GDP incorporates a large number of non-market goods and services that are of little value to
society.
b.
GDP places too much emphasis on the value of leisure.
c.
GDP fails to account for the quality of the environment.
d.
All of the above are correct.
8.
GDP is not a perfect measure of well-being; for example,
a.
GDP excludes the value of volunteer work.
b.
GDP does not address the distribution of income.
c.
GDP does not address environmental quality.
d.
All of the above are correct.
9.
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?
a.
GDP would definitely increase, despite the fact that GDP includes leisure.
b.
GDP would definitely increase because GDP excludes leisure.
c.
GDP could either increase or decrease because GDP includes leisure.
d.
GDP could either increase or decrease because GDP excludes leisure.
10.
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.
GDP would definitely increase, despite the fact that GDP includes environmental quality.
b.
GDP would definitely decrease because GDP includes environmental quality.
c.
GDP would definitely increase because GDP excludes environmental quality.
d.
GDP could either increase or decrease because GDP excludes environmental quality.
11.
The underground economy
a.
excludes the amount of criminal activity in an economy.
b.
is larger for developed nations than developing nations when measured as a percent of GDP.
c.
includes otherwise legal transactions that go unreported or unrecorded.
d.
in the United States is insignificant is size when compared to the official measure of GDP.
12.
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 $3,000, a GDP deflator of 400, and
population of 150. What happened to the
real GDP per person?
a.
It more than doubled.
b.
It increased, but it less than doubled.
c.
It was unchanged.
d.
It decreased.
13.
During a presidential campaign, the incumbent argues that he should be reelected because
nominal GDP grew by 12
percent during his 4-year term in office. You know that population
grew by 4 percent over the period and that the
GDP deflator increased by 6 percent during the
past 4 years. You should conclude that real GDP per person
a.
grew by more than 12 percent.
b.
grew, but by less than 12 percent.
c.
was unchanged.
d.
decreased.
14.
Suppose that over the last twenty-five years a country’s nominal GDP grew to three times its
former size. In the
meantime, population grew by 40 percent and prices rose by 100 percent.
What happened to real GDP per person?
a.
It more than doubled.
b.
It increased, but it less than doubled.
c.
It was unchanged.
d.
It decreased.
15.
The information for 2008 in millions in the table below was reported by the World Bank. On the
basis of this
information, which list below contains the correct ordering of real GDP per person
from highest to lowest?
Country
GDP (Constant US$)
GDP(Current US$)
Population
Germany
2,091,573
3,649,493
82.11
Japan
5,166,281
4,910,839
127.70
U.S.
11,513,872
14,093,309
304.06
a.
Japan, Germany, United States
b.
Japan, United States, Germany
c.
Germany, United States, Japan
d.
United States, Japan, Germany
16.
The information below for 2008 in millions was reported by the World Bank. On the basis of this
information, which
list below contains the correct ordering of GDP per person from highest to
lowest?
Country
GDP (Constant US$)
GDP(Current US$)
Population
Argentina
$394,595
$328,465
39.88
Bolivia
$11,373
$16,674
9.69
Peru
$84,241
$129,109
28.84
a.
Argentina, Bolivia, Peru
b.
Argentina, Peru, Bolivia
c.
Bolivia, Argentina, Peru
d.
Peru, Bolivia, Argentina
17.
The information below for 2008 in millions was reported by the World Bank. On the basis of this
information, which
list below contains the correct ordering of GDP per person from highest to
lowest?
Country
GDP (Constant US$)
GDP(Current US$)
Population
Ghana
7,690
16,653
23.35
Kenya
17,569
30,354
38.76
Tanzania
15,394
20,490
41.276
a.
Ghana, Kenya, Tanzania
b.
Ghana, Tanzania, Kenya
c.
Kenya, Tanzania, Ghana
d.
Kenya, Ghana, Tanzania
18.
Last year country A had a nominal GDP of $600 billion, a GDP deflator of 150 and a population of
40 million.
Country B had a nominal GDP of $720 billion, a GDP deflator of 120 and a population of 50
million. From these
numbers which country is likely to have had the higher standard of living?
a.
Country A because it had the higher nominal GDP per person.
b.
Country B because it had the higher nominal GDP per person.
c.
Country A because it had the higher real GDP per person.
d.
Country B because it had the higher real GDP per person.
19.
On the basis of the information presented in the table below, which presents the correct ordering
of real GDP per
person from highest to lowest?
Country
Real GDP
Population
Atlantis
$4,800 billion
127 million
Merpois
$240 billion
7.2 million
Bensalem
$9,800 billion
280 million
a.
Atlantis, Merpois, Bensalem
b.
Bensalem, Atlantis, Merpois
c.
Atlantis, Bensalem, Merpois
d.
Bensalem, Merpois, Atlantis
20.
International data on GDP and socioeconomic variables
a.
are inconclusive about the relationship between GDP and the economic well-being of citizens.
b.
suggest that poor nations actually might enjoy a higher standard of living than do rich nations.
c.
leave no doubt that a nation‘s GDP is closely associated with its citizens’ standard of living.
d.
indicate that there are few real differences in living standards around the world, in spite of the
large
differences in GDP between nations.
21.
International studies of the relationship between GDP per person and quality of life measures such
as life
expectancy and literacy rates show that larger GDP per person is associated with
a.
longer life expectancy and a lower percentage of the population that is literate.
b.
longer life expectancy and a higher percentage of the population that is literate.
c.
very nearly the same life expectancy and a lower percentage of the population that is literate.
d.
very nearly the same life expectancy and a higher percentage of the population that is literate.
22.
Countries with low GDP per person tend to have
a.
lower rates of child malnutrition.
b.
fewer infants with low birth weight.
c.
higher rates of infant mortality.
d.
more access to safe drinking water.
23.
Otherwise legal transactions that go unreported or unrecorded are called
a.
the underground economy.
b.
the shadow economy.
c.
the informal economy.
d.
All of the above are correct.
24.
Underground economic activity as a percentage of GDP was highest in
a.
Bolivia.
b.
Mexico.
c.
Australia.
d.
the United States.
25.
Rank the countries from highest to lowest based on underground economic activity as a
percentage of GDP.
a.
Bolivia, Thailand, United States, Sweden.
b.
Thailand, United States, Sweden, Bolivia.
c.
United States, Bolivia, Sweden, Thailand.
d.
Bolivia, Thailand, Sweden, United States.
True/False and Short Answer
1.
In years of economic contraction, firms throughout the economy increase their production of goods
and services,
employment rises, and jobs are easy to find.
a.
True
b.
False
2.
Macroeconomic statistics include GDP, the inflation rate, the unemployment rate, retail sales, and
the trade deficit.
a.
True
b.
False
3.
Macroeconomic statistics tell us about a particular household, firm, or market.
a.
True
b.
False
4.
Macroeconomics is the study of the economy as a whole.
a.
True
b.
False
5.
The goal of macroeconomics is to explain the economic changes that affect many households,
firms, and markets
simultaneously.
a.
True
b.
False
6.
Microeconomics and macroeconomics are closely linked.
a.
True
b.
False
7.
The basic tools of supply and demand are central to microeconomic analysis but are of little use to
macroeconomics.
a.
True
b.
False
8.
GDP is the most closely watched economic statistic because it is thought to be the best single
measure of a society’s economic well-being.
a.
True
b.
False
9.
GDP can measure either the total income of everyone in the economy or the total expenditure on
the economy’s output of goods and services, but GDP cannot measure both at the same time.
a.
True
b.
False
10.
For an economy as a whole, income must exceed expenditure.
a.
True
b.
False
11.
An economy’s income is the same as its expenditure because every transaction has a buyer and a
seller.
a.
True
b.
False
12.
GDP is the market value of all final goods and services produced by a country’s citizens in a
given period of time.
a.
True
b.
False
13.
GDP is the market value of all final goods and services produced within a country in a given
period of time.
a.
True
b.
False
14.
GDP adds together many different kinds of products into a single measure of the value of
economic activity by using
market prices.
a.
True
b.
False
15.
U.S. GDP includes the market value of rental housing, but not the market value of owner–
occupied housing services.
a.
True
b.
False
16.
U.S. GDP excludes the production of most illegal goods.
a.
True
b.
False
17.
U.S. GDP includes estimates of the value of items that are produced and consumed at home,
such as housework
and car maintenance.
a.
True
b.
False
18.
GDP excludes the value of intermediate goods because their value is included in the value of final
goods.
a.
True
b.
False
19.
Both the value of hamburgers sold by a restaurant and the value of the beef it used to make these
hamburgers are
included in GDP.
a.
True
b.
False
20.
GDP includes the value of paper clips but does not also count the value of the metal used to make
them.
a.
True
b.
False
21.
Additions to inventory subtract from GDP, and when the goods in inventory are sold, the
reductions in inventory add
to GDP.
a.
True
b.
False
22.
If a good produced this quarter goes into inventory, then it is included in this period’s GDP. If it is
sold in the next
quarter, it will have no effect on GDP.
a.
True
b.
False
23.
While GDP includes tangible goods such as books and bug spray, it excludes intangible services
such as the services
provided by teachers and exterminators.
a.
True
b.
False
24.
At a rummage sale, you buy two old books and an old rocking chair; your spending on these items
is not included in
current GDP.
a.
True
b.
False
25.
When an American doctor opens a practice in Bermuda, his production there is part of U.S.
GDP.
a.
True
b.
False
26.
If the U.S. government reports that GDP in the third quarter was $16 trillion at an annual rate,
then the amount of
income and expenditure during quarter three was $4 trillion.
a.
True
b.
False