ECON 200 CH 21 Post-HW

Gross domestic product is a measure of:

a country's total income.

a county's income divided by the population.

the amount by which the value of an item is increased at each stage of production.

spending on exports minus spending on imports.

a country's total income.

Prices are different from values because:

prices tell more about well-being.

values account for surpluses.

prices equal the consumer's marginal benefit.

prices account for surpluses.

values account for surpluses.

This graph addresses material living standards. Knowing this, and judging by the scale on the horizontal axis, this graph is of:

GDP per capita

In order to compare the market value of various things produced within an economy, a common unit is used, which has been the _____ an object.

value added to

market price of

GDP of

cost of

market price of

GDP fails to measure both banned activities such as gambling or illegal drugs and cash-only deals such as paying a neighbor to watch your dog because those interactions are a part of:

leisure.

nonmarket activities.

the shadow economy.

environmental degradation.

the shadow economy.

Horatio is making a presentation on the state of the U.S. economy for an audience that has never taken economics coursework. Which of the four scaling strategies for big numbers could Horatio use to help his audience understand that the U.S. GDP is $19 trillion?

exaggerate the GDP

compare it to the size of the economy

compare it to the GDP of ancient Rome

present it as GDP per person

present it as GDP per person

When calculating GDP, Y is used to represent:

investment.

GDP.

consumption.

government purchases.

GDP.

Because GDP treats natural resources as free, activities such as excessive logging and excessive mining for gold are only measured as _____ despite the external negative effects.

profits

final goods

savings

production

production

Which scenario is relying on comparing big numbers to the size of the economy?

A politician breaks down the new $60 billion budget into what that will cost each person.

A hedge fund manager uses the company's performance over the past 10 years to show how its profits have increased over time.

An insurance firm tries to get investors by advertising the expected growth of the insurance industry as part of the total economy.

An economist shows the time it will take for the population to double.

An insurance firm tries to get investors by advertising the expected growth of the insurance industry as part of the total economy.

When calculating GDP, NX is used to represent:

net exports.

government purchases.

consumption.

investment.

net exports.

GDP as a measure of the economy is limited by its inability to measure nonmarket activities such as:

spending on capital assets.

government purchases.

household work.

net exports.

household work.

Which scenario would be described as comparing a large number to its past values?

An economist compares the nation's debt to the size of the economy.

A lawmaker wants to fund a new park because GDP, and thus taxes, increased by 3% since last year.

An economist calculates when the size of the economy will double given the current growth rate.

A politician breaks down the new $60 billion budget into what that will cost each person.

A lawmaker wants to fund a new park because GDP, and thus taxes, increased by 3% since last year.

A city building a new elementary school contributes to _____ when calculating GDP.

G, government spending

C, consumption

M, mandated purchases

I, investment

G, government spending

In 1981, Mexico grew its real GDP by 8.3% and had prices rise by 8.1%. In 1982, Mexico grew its real GDP by 8.8% and had prices rise by 1.5%. Calculate Mexico's growth in nominal GDP in 1982.

10.3%

16.4%

1.5%

7.3%

10.3%

In 1987, Australia had a growth rate of 1.6% and a GDP of $189 billion. Similarly, New Zealand also had a growth rate of 1.6% and a GDP of $40 billion. If both maintain the same growth rate, Australia will double in approximately _____ and New Zealand will double in approximately _____.

44 years; 25 years

0.023 year; 0.023 year

118 years; 25 years

44 years; 44 years

44 years; 44 years

Ziyi is attempting to calculate the GDP of Mexico. She sees that to build a phone in Mexico, a manufacturer spends $30 on batteries, $20 on touch screens, and $100 on computer chips, all to sell the phone for $300. Ziyi calculates the phone being produced at $150 for GDP as the difference between the costs to make the phone and the price it is sold at. Is she correct, and why?

She is correct, as GDP measures the sum of the intermediate goods that are used in the production of the good or service. So the impact on GDP should equal the sum of batteries, touch screens, and computer chips.

She is incorrect, as GDP only measures the cost of the product being produced. So the phone should have a $150 effect on GDP from the cost to produce, not the difference between the selling price and cost.

She is incorrect, as GDP only cares about the end product produced. So the phone would have a $300 impact on GDP.

She is correct, as GDP measures the profit made by the sale of items.

She is incorrect, as GDP only cares about the end product produced. So the phone would have a $300 impact on GDP.

Which scenario is relying on visualization techniques to make large numbers more manageable?

A judge compares total crimes this year to those of the past few years.

A politician breaks down the new $60 billion budget into what that will cost each person.

A movie director has her actors fill a garage with the money they made to show the workers how successful the last movie was.

A high school teacher wants to show her students how big the military budget is by comparing it to the size of the economy.

A movie director has her actors fill a garage with the money they made to show the workers how successful the last movie was.

In 1987, Australia had a growth rate of 1.6% and a GDP of $189 billion. If Australia maintains the same growth rate, how long will it take to double its GDP?

approximately 4,375 years

approximately 438 years

approximately 118 years

approximately 44 years

approximately 44 years

Sharon is getting the tires replaced on her car, and she is paying for the replacement. In this case, the tire is _____ in GDP because it is a(n) _____.

counted; intermediate good

counted; final good

not counted; final good

not counted; intermediate good

counted; final good

Jabahri is willing to spend up to $20 of the $100 he currently has to ride a cable car. If San Francisco sells cable car rides for $10, then GDP would _____ the economic value of Jabahri riding a cable car by _____ since GDP is based on prices and not values.

underestimate; $90

overestimate; $10

overestimate; $90

underestimate; $10

underestimate; $10

Which scenario would be described as the strategy that compares a large number to the total state of the economy?

A military general argues for more funding because the government is spending only 10% of its budget, or 3% of GDP, on the military.

An economist shows an audience how severe overpopulation is by determining when the population will double.

A scientist shows the increase in pollution by comparing it to pollution in previous years.

A politician shows how much the government spends on the military by stating the amount each individual in the country would receive if the money were given to individuals.

A military general argues for more funding because the government is spending only 10% of its budget, or 3% of GDP, on the military.

Jeffrey is holding a shareholder meeting for his corporation, which has historically been successful but has always had a high amount of debt. His shareholders are afraid of the company's relatively high debt-to-income ratio. What strategy can Jeffrey use to attempt to make the debt appear smaller for the company and convince shareholders there is nothing to worry about?

compare the debt to the size of the economy

exaggerate the sales of the company

use the rule of 70 to show when the debt would double

compare the debt to its historical levels

compare the debt to its historical levels

James is growing older and no longer cares to pull weeds on his property. Instead, James pays the kid next door $10 a week in cash to make sure his yard is weed free. GDP would fail to measure this activity because of what limitation?

It does not take into account the shadow economy.

Environmental degradation isn't counted.

Prices are not values.

Leisure doesn't count.

It does not take into account the shadow economy.

Tyreek gets $15 worth of happiness from each water balloon he buys and $8 worth of happiness from each pool noodle he buys. Tyreek goes to the store to buy two water balloon packs and three pool noodles, and he buys them at $10 per water balloon pack and $2 per pool noodle. In this scenario, what is the effect on the GDP of this transaction, and how much does it underestimate actual economic surplus?

GDP effect = $12, overestimated by $11

GDP effect = $26, overestimated by $28

GDP effect = $26, underestimated by $28

GDP effect = $12, underestimated by $11

GDP effect = $26, underestimated by $28