Ch 7
Assume that the size of the underground economy increases both absolutely and relatively over time. As a result,
GDP will tend to increasingly understate the level of output through time.
Answer this question based on the given information for an economy in year 1. I. Dollar value of resource extraction activity = $20 billion il. Dollar value of production activity = $50 billion iii. Dollar value of distribution activity = $80 billion iv. Dollar value of final output = $110 billion Suppose the next year, the dollar value of distribution activity fell to $70 billion, but the other values remained the same. Based on this, we could conclude that from year 1 to year 2,
GO fell by $10 billion, while GDP was unchanged.
GDP understates the amount of economic production in the United States because it excludes
work performed by people for their own benefit.
Environmental pollution is accounted for in
none of these.
Gross output (GO) and GDP both measure
output of an economy.
The growth of GDP may understate changes in the economy's economic well-being over time if the
quality of products and services improves.
During the 2007-2009 recession,
real GO fell by roughly twice the amount that real GDP fell.
Gross output (GO)
sums together the dollar value of economic activity at every stage of production.
The "underground economy" is mostly made up of
tax-evasion activities.
Which of the following government agencies estimates and compiles the U.S. GDP accounts?
the Bureau of Economic Analysis
Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?
the child-care services provided by stay-at-home parents
GDP excludes
the market value of unpaid work in the home.
GDP tends to underestimate the productive activity in the economy because excludes the value of output from
the underground economy.
The service a homeowner performs when she mows her yard is not included in GDP because
this is a nonmarket transaction.
GDP tends to overstate economic well-being because it takes into account
total spending to deal with the adverse health effects of some products.
GDP excludes most nonmarket transactions. Therefore, GDP tends to
underestimate the amount of production in the economy.
GDP tends to
understate economic welfare because it does not take into account increases in leisure.
A large underground economy results in an
understated GDP.
Gross output (GO) for an economy in a given year
will always exceed GDP for that economy in the same year.
Answer this question based on the given information for an economy in some year. 1. Dollar value of resource extraction activity = $20 billion II. Dollar value of production activity = $50 billion II. Dollar value of distribution activity = $80 billion IV. Dollar value of final output = $110 billion Gross output for this economy equals
$260 billion.
The value of transactions in the underground economy is estimated to be about what percentage of GDP in the United States?
7 percent
(Last Word) The strategy for measuring the value of an economy's output has become more challenging over the past 20 years because
All of these choices are correct
GDP does not include which if the following activities?
Couples remodeling their own homes
GDP tends to overstate economic well-being because it takes into account
expenditures undertaken to correct pollution.
Which of the following activities is excluded from GDP, causing GDP to understate a nation's production?
goods and services produced in the underground economy
(Last Word) The statisticians at the BEA have decided that quality improvements matter and should be accounted for in GDP and inflation to the extent possible. The procedure for doing so is called the
hedonic adjustment.
GDP estimates account for which of the following items?
household spending for mechanics and hair stylists
Gordon sells narcotics "on the street." This type of illegal activity
is excluded from GDP figures.
