Underground activities are not counted in gdp because

ECON1A: Macroeconomics Quiz 4: Chapter 8 Dr. Sung Kim

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Suppose in 2018, you purchase a house built in 2003. Which of the following would be included in the gross domestic product for 2018? A) the value of the house in 2003 B) the value of the services of the real estate agent C) the value of the house in 2018 D) the value of the house in 2018 minus depreciation

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2) Investment, as defined by economists, would include the purchase of a A) computer by an accounting firm. B) share of stock in ExxonMobil. C) government bond. D) corporate bond.

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3) In the first half of 2017, automobile sales in the United States were lower than they were in the first half of 2016. The decrease in auto sales impacts GDP because new automobiles are counted as ________ when purchased by households and ________ when purchased by businesses. A) investment; consumption B) nondurable goods; durable goods C) durable goods; nondurable goods D) consumption; investment

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4) How are intermediate goods treated in the calculation of GDP? A) They are included only if they are imported. B) Their value is counted separately, but is not included as part of the value of the final good for which they are an input.

C) Their value is not counted separately, but included as part of the value of the final good for which they are an input.

D) Their value is counted separately, and their value is also included as part of the value of the final good for which they are an input.

4)

Table 8 -4

Consumption expenditures $800 Investment expenditures 300 Government purchases 300 Government transfer payments 400 Exports 300 Imports 100

5) Refer to Table 8 -4. Consider the data above (in billions of dollars) for an economy: Gross domestic product (in billions of dollars) for this economy equals A) $2,200. B) $2,100. C) $1,600. D) $1,400.

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6) Legalizing all forms of illegal activities A) reduces GDP and increases the size of the underground economy. B) increases GDP and increases the size of the underground economy. C) increases GDP and reduces the size of the underground economy. D) reduces GDP and reduces the size of the underground economy.

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Table 8 -18

2013 2018 Product Quantity Price Quantity Price

Camera 100 $10 120 $12 Legal services 50 15 45 20 Books 200 40 210 45

A very simple economy produces three goods: cameras, legal services, and books. The quantities produced and their corresponding prices for 2013 and 2018 are shown in the table above.

7) Refer to Table 8 -18. What is real GDP in 2018, using 2013 as the base year? A) $28,885 B) $11,790 C) $11,200 D) $10,275

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8) Refer to Table 8 -18. What is the GDP deflator in 2018 if 2018 is the base year? A) 120 B) 118 C) 100 D) 87

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9) If the quantity of goods and services produced in the economy decreases, A) nominal GDP would certainly increase. B) real GDP would certainly increase. C) it may be possible for real GDP to increase. D) it may be possible for nominal GDP to increase.

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10) Which of the following could cause nominal GDP to increase next year, but real GDP to decrease? A) The price level rises and the quantity of final goods and services produced rises. B) The price level falls and the quantity of final goods and services produced falls. C) The price level falls and the quantity of final goods and services produced rises. D) The price level rises and the quantity of final goods and services produced falls.

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Answer Key Testname: ECON1A-QUIZ4B-CH8

1) B 2) A 3) D 4) C 5) C 6) C 7) D 8) C 9) D 10) D