Macro Chapter 8 - UTC - Bonnal

The drawback to calculating real GDP using base-year prices is that:

Relative prices change over time and these are not reflected in base-year prices, and this distorts GDP.

In 2015, the U.S. auto industry experienced rising sales. The automobile industry was experiencing the effects of:

The business cycle.

Which of the following could cause nominal GDP to decrease, but real GDP to increase?

The price level falls and the quantity of final goods and services produces rises.

If nominal GDP is $5 trillion and real GDP is $4 trillion, the GDP deflator is:

125

The GDP deflator in year 2 is 105, using year 1 as the base year. This means that, on average, the cost of goods and services is:

5% higher in year 2 than in year 1.

Recent estimates put the size of the underground economy in the United States at ________ of measured GDP.

8 percent.

In 2015, Ford Motor Company's sales were rising. These events were caused by:

An economic expansion.

Nominal GDP is another term for:

Current-dollar GDP.

The size of the underground economy would tend to decrease if the government of a country:

Decreased government regulations on businesses.

The U.S. work week has declined from 60 hours in 1890 to 40 hours today. The impact of the decline in working hours:

Decreases U.S. GDP and increases the well-being of a typical working person in the U.S.

The informal sector can be a significant drag on the economies of developing countries because the firms in the informal sector:

Do not pay taxes to the government.

Which of the following statements about the underground economy is true?

Excluding underground economy production from measured GDP causes errors in GDP growth estimates in the long run.

Suppose Bob works for Mary as a proofreader. Mary and Bob fall deeply in love, marry, and have eight children. Bob stops working for Mary in order to care for the children. What will be the effect on GDP?

GDP will decrease.

The value of what a U.S.-owned McDonald's produces in South Korea is included in the U.S. ________ and the South Korean ________.

GNP; GDP

The output of U.S. citizens who work in Canada would be included in the:

Gross domestic product of Canada.

The output of Mexican citizens who work in Texas would be included in the:

Gross national product of Mexico.

Gross domestic product understates the total production of final goods and services because of the omission of:

Household production.

During a business cycle expansion, total production ________ and total employment ________.

Increases; decreases

Which of the following would be directly counted in GDP in 2016?

Kitchen cabinets purchased from Home Depot in 2016 to be installed in a house built in 1997.

Which of the following is likely to increase measured GDP?

Marijuana becomes legal to grow and sell.

Disposable personal income equals person income:

Minus personal tax payments.

Gross domestic product is calculated by summing up:

The total market value of final goods and services produced in the economy during a period of time.

Real GDP is GDP in a given year:

Valued in the prices of the base year.