Question : 5.3   The Use and Limitations of Real GDP 1) GDP is A) : 1238428

5.3   The Use and Limitations of Real GDP

1) GDP is

A) a perfect measure of the standard of living.

B) a perfect measure of the value of production.

C) a measure which includes the value of all newly produced goods and services.

D) an imperfect measure of the standard of living.

E) the only factor that affects our standard of living.

2) Even though it is not a perfect measure, economists can use real GDP to

i.compare how the value of the goods and services produced in China have changed

over the past 10 years.

ii.look at the length of recessions and expansions in the United States.

iii.compare the standard of living in China versus the standard of living in Vietnam.

A) ii only

B) i, ii and iii

C) i and iii

D) i and ii

E) ii and iii

3) Although imperfect, which of the following is used as a measure of the standard of living?

A) real GDP ÷ population

B) real GDP × population

C) nominal GDP × population

D) nominal GNP ÷ population

E) nominal GNP × population

4) In the United States, between 1961 and 2011, there has been

i.a consistent , non-changing growth rate of potential GDP per person.

ii.an increase in the standard of living based on real GDP per person.

iii.fluctuations in real GDP per person around potential GDP per person.

A) ii only

B) i, ii and iii

C) i and ii only

D) ii and iii

E) i only

5) In 1961, real GDP totaled $575 billion and in 2011 it totaled $1,255 billion. Between 1961 and 2011, the population increased from 50 million to 100 million. Between 1961 and 2011, the standard of living based on real GDP per person

A) increased from $11,500 to $12,550.

B) increased by over 300 percent.

C) increased by about 118 percent.

D) decreased from $125,500 to $28,750.

E) decreased by 9 percent.

6) If we use GDP to measure our standard of living, then our procedure is

A) inaccurate because our standard of living does not depend only on goods and services.

B) accurate because our standard of living depends solely on goods and services.

C) inaccurate because our standard of living has nothing to do with goods and services.

D) inaccurate because our standard of living only depends on used goods and services.

E) accurate only if we use nominal GDP rather than real GDP.

7) The business cycle describes

A) the change in potential GDP over time.

B) the change in the standard of living across countries.

C) the behavior of real GDP over time.

D) the behavior of nominal GDP over time.

E) the behavior of GNP over time.

8) The business cycle is defined as

A) changes in the stock market.

B) changes in financial markets.

C) persistent growth in potential GDP.

D) irregular ups and downs in production and jobs.

E) the period of time during which the unemployment rate is rising.

9) The relationship between real GDP and potential GDP over the business cycle can be best summarized by which of the following statements?

A) Real GDP fluctuates around potential GDP.

B) Real GDP is always equal to potential GDP.

C) Real GDP cannot be greater than potential GDP.

D) Real GDP cannot be less than potential GDP.

E) Real GDP cannot be equal to potential GDP.

10) Over the business cycle,

A) potential GDP fluctuates around its trend.

B) real GDP fluctuates around its trend.

C) only potential GDP fluctuates around its trend and real GDP remains equal to its trend.

D) only real GDP fluctuates around its trend and potential GDP remains equal to its trend.

E) neither real GDP nor potential GDP fluctuates because they just grow smoothly along their trends.