ECO 202 Chapter 8– Questions With Solutions
Which of the following is not a shortcoming of GDP as a measure of well-
being?
a. GDP is not adjusted for the effects of pollution caused by the production of
goods and services
b. GDP only counts final goods and services and not intermediate goods
c. GDP is not adjusted for crime and other social problems
d. GDP does not include the value of leisure Right Ans - B
If Americans still worked 60 hour work weeks, as they did in 1890
a. both GDP and the well being of the typical person would be lower than they
are
b. GDP would be lower than it is, but well being of the typical person would be
higher
c. GDP would be much higher than it is, but the well being of the typical person
would no necessarily be higher.
d. both GDP and the well being of the typical person would be much higher
than they are Right Ans - C
Year 1 (Base year):
Product Quantity $ per unit
Pumpkin Pies 130 $3.00
Software 850 $50.00
Year 2:
Product Quantity $ per unit
Pumpkin pies 162.50 $4.50
Software 1,275.00 $100.00
In year 2, Nominal GDP is equal to ( ), and real GDP is ( ). Right Ans -
$128,231.25
$64,237.50
Nominal GDP: value of final goods at current year
, Nominal GDP=Quantity* $ per unit in current year
Nominal GDP=(162.50*$4.50)+(1275*$100)=$128,231.25
Real GDP: value of final goods at base year prices
Real GDP=Quantity* $ per unit in base year
Real GDP=(162.50*$3.00)+(1275*$50)= $64,237.50
Which of the following would be included in the gross national product (GNP)
of the united states?
a. production from a canadian firm that operates in Montana
b. Production from a U.S. firm that operates in Mexico
c. Production from a Hungarian citizen who works in Denver, CO
d. All of the above are included in the GNP of the U.S. Right Ans - B
Suppose the federal government collects in personal income taxes increases,
while the level of GDP remains the same. What will happen to the values of
national income, personal income, and disposable personal income?
National income will (increase/decrease/ remain the same)
Personal income will (increase/decrease/remain the same)
Disposable personal income will (increase/decrease/remain the same)
Right Ans - Remain the same
Remain the same
Decrease
National Income:GDP - Consumptions
GDP remains constant so National income remains the same
Personal income:national income + income
National income remains the same so does Personal income
Disposable income: personal income - personal taxes
personal income remains the same but taxes are increased. This decreases
disposable personal income
Household production and the underground economy
Which of the following is not a shortcoming of GDP as a measure of well-
being?
a. GDP is not adjusted for the effects of pollution caused by the production of
goods and services
b. GDP only counts final goods and services and not intermediate goods
c. GDP is not adjusted for crime and other social problems
d. GDP does not include the value of leisure Right Ans - B
If Americans still worked 60 hour work weeks, as they did in 1890
a. both GDP and the well being of the typical person would be lower than they
are
b. GDP would be lower than it is, but well being of the typical person would be
higher
c. GDP would be much higher than it is, but the well being of the typical person
would no necessarily be higher.
d. both GDP and the well being of the typical person would be much higher
than they are Right Ans - C
Year 1 (Base year):
Product Quantity $ per unit
Pumpkin Pies 130 $3.00
Software 850 $50.00
Year 2:
Product Quantity $ per unit
Pumpkin pies 162.50 $4.50
Software 1,275.00 $100.00
In year 2, Nominal GDP is equal to ( ), and real GDP is ( ). Right Ans -
$128,231.25
$64,237.50
Nominal GDP: value of final goods at current year
, Nominal GDP=Quantity* $ per unit in current year
Nominal GDP=(162.50*$4.50)+(1275*$100)=$128,231.25
Real GDP: value of final goods at base year prices
Real GDP=Quantity* $ per unit in base year
Real GDP=(162.50*$3.00)+(1275*$50)= $64,237.50
Which of the following would be included in the gross national product (GNP)
of the united states?
a. production from a canadian firm that operates in Montana
b. Production from a U.S. firm that operates in Mexico
c. Production from a Hungarian citizen who works in Denver, CO
d. All of the above are included in the GNP of the U.S. Right Ans - B
Suppose the federal government collects in personal income taxes increases,
while the level of GDP remains the same. What will happen to the values of
national income, personal income, and disposable personal income?
National income will (increase/decrease/ remain the same)
Personal income will (increase/decrease/remain the same)
Disposable personal income will (increase/decrease/remain the same)
Right Ans - Remain the same
Remain the same
Decrease
National Income:GDP - Consumptions
GDP remains constant so National income remains the same
Personal income:national income + income
National income remains the same so does Personal income
Disposable income: personal income - personal taxes
personal income remains the same but taxes are increased. This decreases
disposable personal income
Household production and the underground economy
