Final question set # 2 for Friday – Flashcards
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11) The underground economy can be described as
A) production of intermediate goods and services.
B) economic production that includes mining.
C) economic activity that is hidden from the government to avoid taxes or because the activity is illegal.
D) production of infrastructure that spurs growth in the rest of the economy.
answer
C. Hidden from the government to avoid taxes and/or because it involves an illegal activity.
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12) Marla is an architect who is designing a home for Chuck. Chuck is paying Marla $150 per hour to design his new home. When Chuck and Marla get married, Marla continues to work on designing the home, but she no longer charges Chuck for her work. As a result, GDP ________ because _______.
A) falls; Marla's work takes place in the underground economy once she's married
B) falls; Marla's work becomes less valuable once she's married
C) falls; Marla's architectural design services are no longer bought by Chuck once they're
married
answer
C
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The measure of production that values production using current prices is called
A) value-added GDP.
B) nominal GDP.
C) real GDP.
D) underground GDP
answer
Nominal GDP
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The measure of production that values output using base-year prices is called
answer
Real GDP
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Nominal GDP is another term for
A) inflation-adjusted GDP.
B) real GDP.
C) current dollar GDP
answer
Current dollar GDP
question
2004. 2009
Qu Price. Qu. Price
Movies. 20. 6. 30. 7
Burgers. 100. 2. 90. 250
Bikes. 3. 1000. 6. 1100
2009 Nominal GDP?
2004 nominal GDP?
answer
2009 nominal=(30x7) +. (90x2.50) +( 6x1100)=7035.
2004 nominal =120+200+3000=3320
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Real GDP is
answer
The measure of production that values output using base-year prices is called
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Nominal GDP is
answer
The measure of production that values production using current prices.
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9) Between 2008 and 2009, if an economy's exports rise by $8 billion and its imports fall by $8 billion, by how much will GDP change between the two years, all else equal?
A) Net exports will increase GDP by $8 billion.
B) The increase in exports is offset by the decrease in imports, so there is no change in net exports and no effect on GDP.
C) Net exports will increase GDP by $16 billion.
D) Net exports will decrease GDP by $8 billion
answer
C. net exports will increase GDP by 16 billion.
8 - -8 = 16. Exports rose by 8. Imports fell, so you take away a negative 8 from the increase in exports.
Might be easier to start from beginning and say that everything but net exports = 100.
If your exports were $20 and your imports were $10 the first year, then what is the total?
100+(20-10)=110
Year 1 total 110
Year 2, you increase your exports by 8 (20+8=28) and decrease your imports by 8 (10-8=2)
100+ (28-2)= 126
Year 2 total 126
110 to 126 is an increase of 16
(126-110= 16)
question
Between 2008 and 2009, if an economy's exports rise by $12 billion and its imports increase by $7 billion, by how much will GDP change between the two years, all else equal?
answer
Increase 5 billion
12-7=5 billion. 12 more in exports minus the 7 increase in imports.
Start with $100 from everything else
100 +20 in exports and 10 in imports = 100+20-10=110
Year 1 total = 110
Year 2 exports increase by 12 (20+12)
imports increase by 7 (10+7)
100+(32-17)=115
Increase from 110 bill to 115 bill = 5 billion.
question
Between 2008 and 2009, if an economy's exports fell by $12 billion and its imports increase by $7 billion, by how much will GDP change between the two years, all else equal?
answer
-12 - 7 = - 19
Start with 100
exports 20
imports 10
total = 110
Year 2 exports = 20-12=8
year 2 imports = 10+7=17
100+8-17=91
Decrease from 110 to 91 = 110-91=-19 bill
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Between 2008 and 2009, if an economy's exports fell by $12 billion and its imports fell by $12 billion, by how much will GDP change between the two years, all else equal
answer
No change
-12 - (- 12)=
0
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10) GDP is not a perfect measure of well-being because
A) the value of leisure is included in GDP.
B) GDP is not adjusted for pollution.
C) GDP is adjusted for changes in crime rates.
D) GDP is adjusted for increases in drug addiction
answer
B. Not adjusted for pollution
(or education level or happiness level or crime rate etc )
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17) If real GDP increases we know for sure that
A) output has risen.
B) prices have risen.
C) prices have risen but output has remained constant.
D) prices have remained constant.
answer
Output has risen
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21) If nominal GDP rises we can say that
A) production has risen and prices remain constant.
B) prices have risen and production remains constant.
C) production has risen or prices have risen or both have risen.
D) production has fallen and prices have risen
answer
C Production has risen or prices have risen or both have risen.
question
When measuring GDP, new automobile sales are counted as consumption when the
automobiles are purchased by ________ and as investment when they are purchased by
________.
A) households; businesses
B) households; the government
C) businesses; the government
D) foreign customers outside the United States; households
answer
New auto sales:
A) Consumption for households, but investments for businesses
