Eco 6

Gross domestic product (GDP) decreases if the quantity of illegal drugs sold decreases.

False

If the consumer price index (CPI) rises over a year from 220 to 230, then the inflation rate is 10 percent.

False

Net taxes are indirect business taxes plus transfer payments.

False

If consumption= $2,000, investment $600, government purchases $500, net exports -$40, transfer payments $340, then

GDP =$3,060

Which of the following is true of exports and imports?

Imports are added and exports are subtracted from a nation's gross domestic product (GDP).

Which of the following correctly illustrates the leakages- injections approach to GDP?

S+(NT) M I+G+X

Which of the following actions will decrease the gross domestic product (GDP)?

Tom gets fired for being late often after his alarm clock breaks.

Chain-weighted indexes have less bias compared to fixed- weight indexes.

True

Whenever there is inflation, increase in nominal gross domestic product (GDP) overstates the growth rate of the economy

True

The price index in the base year always equals

100

If the nominal gross domestic product (GDP) for a year is $5.4 trillion, and the real gross domestic product (GDP) for the same year is $3.6 trillion, the GDP price index is

150

If the consumer price index (CPI) is 200 one year and 206 the next year, the annual rate of inflation as measured by the CPI is approximately

3 percent

Marianne and Laura are both homemakers with children When Laura starts to work as an unpaid volunteer at a hospital, she hires Marianne to care for her young child. In this context, the gross domestic product (GDP) will

increase

The table below shows the price indexes and the nominal gross domestic product (GDP) for an economy from 2001 to 2005. The real GDP between 2001 and 2002.

increased by slightly less than $10 billion

The GDP price index:

measures the average price of final goods and services produced in an economy

The GDP price index:

measures the average price of final goods and services produced in an economy.

In order to convert nominal gross domestic product (GDP) real gross domestic product (GDP), we must divide:

nominal GDP by the price index

The nominal gross domestic product (GDP) for a country was $1,000 in 2003 and $1,500 in 2004. The GDP price index was 100 in 2003 and 150 in 2004.. Between 2003 and 2004, real GDP

remained the same

When calculating gross domestic product (GDP), double counting can be avoided by:

summing the value added at each stage of production.

The statement "Gross domestic product (GDP) values all output equally" means that:

the market price of output is the measure of that output's value.

Net exports equals

the value of exports minus the value of imports

The existence of the underground economy causes gross domestic product (GDP) statistics to

understate the true volume of economic activity

Depreciation refers to a decrease in the value of a durable good caused by:

wear and tear over time.

Nominal gross domestic product (GDP) is measured in terms of the

current-year prices

If a firm hires labor for $4,000, pays rent of $1,500, buys raw materials for $6,000 from another firm, earns profits of $500, and sells its output for $14,000, the value added by the firm is

$8,000

The value of the films starring Charlie Chaplin produced in the United States that still exist will not be included in this year's U.S. gross domestic product (GDP) because:

Charlie Chaplin did not make the films this year.