ECON 2
Which of the following statements about GDP is correct?
GDP measures two things at once: the total income of everyone in the economy and the total expenditure on the economy's output of goods and services. Money continuously flows from households to firms and then back to households, and GDP measures this flow of money. GDP is generally regarded as the best single measure of a society's economic well-being.
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?
GDP would definitely increase because GDP excludes environmental quality.
Martin, a U.S. citizen, travels to Mexico and buys a newly manufactured motorcycle made there. His purchase is included in
Mexican GDP, but it is not included in U.S. GDP.
Changes in nominal GDP reflect
both changes in prices and changes in the amounts being produced.
The consumption component of GDP includes spending on
durable goods, nondurable goods, and services.
The value of the housing services provided by the economy's owner-occupied houses is
included in GDP, and the estimated rental values of the houses are used to place a value on these housing services.
The underground economy
includes otherwise legal transactions that go unreported or unrecorded.
If an economy's GDP falls, then it must be the case that the economy's
income and market value of all production both fall.
Over the last few decades, Americans have chosen to cook less at home and eat more at restaurants. This change in behavior, by itself, has
increased measured GDP by the value added by the restaurant's preparation and serving of the meals.
A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called
intermediate goods.
What word do economists use to refer to the purchase of goods that will be used in the future to produce more goods and services?
investment
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
investment per business firm.
GDP
is used to monitor the performance of the overall economy and is the single best measure of a society's economic well-being.
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
longer life expectancy and a higher percentage of the population that is literate.
Which of the following is included in GDP?
marijuana purchased legally in Colorado.
If nominal GDP doubles and the GDP deflator doubles, then real GDP
remains constant
Which of the following is included in the investment component of GDP?
spending to build new houses spending to build new factories spending on business equipment such as welding equipment
If total spending rises from one year to the next, then which of the following could not be true?
the economy is producing a smaller output of goods and services, and goods and services are selling at lower prices.
Which of the following is included in government purchases?
the services of a U.S. government attorney valued at the cost of her salary
During the third quarter of this year a firm produces consumer goods and adds some of those goods to its inventory. During the fourth quarter of this year, the firm sells the goods at a retail outlet, with the result that the value of its inventory at the end of the fourth quarter is smaller than the value of its inventory at the end of the third quarter. These actions affect which component(s) of fourth-quarter GDP?
they increase consumption and decrease investment