TAMU Econ 203 Exam 1 questions with correct answers

What is left out of official GDP measures? CORRECT ANSWER 1) Goods and services not exchanged in the markets 2) Underground economy - Cash, Not reported, Not Taxes (Legal and Illegal) 3) Environment (pollution affects the quality of life) 4) •Amount of leisure time affects the quality of life What causes an increase in nominal GDP? CORRECT ANSWER Growth in quantity and/or price GDP Deflator CORRECT ANSWER Measure of the overall change in prices in an economy using the ratio between real and nominal GDP. Inflation Rate CORRECT ANSWER How fast the overall level of prices is changing. What info does GDP per capita not provide? CORRECT ANSWER 1) How equally income is distributed 2) Cost of living within a country 3) How big is underground economy and home production Market Basket CORRECT ANSWER List of specific goods and services in fixed quantities. Consumer Price Index (CPI) CORRECT ANSWER How much the cost of a market basket has changed relative to the