111) Refer to Figure 20-1. Real GDP increased by approximately ________% between 1995 and 2000.
A) 9
B) 17
C) 35
D) 52
E) 75
112) If nominal GDP in some year is $3800 and the GDP deflator for the same year is 152, then the real GDP for that year is
A) $2280.
B) $2500.
C) $3500.
D) $3800.
E) $5776.
113) A country’s computed GDP deflator
1) excludes the changes in the price of imported goods;
2) is less relevant than the measured CPI for the typical consumer;
3) is set to be equal to 100 in its base year.
A) 1 only
B) 2 only
C) 1, 2, and 3
D) 1 and 3
E) 2 and 3
114) Consider Canada’s GDP deflator and Consumer Price Index (CPI). Now suppose the prices of the following goods and services increased. Which is likely to have a larger effect on the GDP deflator than the CPI?
A) bananas
B) chocolate
C) Hollywood movies
D) consumer electronics
E) forest products
115) Consider Canada’s GDP deflator and Consumer Price Index (CPI). Now suppose the prices of the following goods and services increased. Which is likely to have a larger effect on the CPI than the GDP deflator?
A) consumer electronics
B) lumber
C) car parts
D) aircraft engines
E) engineering services
116) One major reason that GDP is an inaccurate measure of the true level of economic activity is that
A) people frequently buy things they do not want.
B) it is statistically very inaccurate.
C) it does not include non-market activities.
D) it cannot be adjusted for changes in prices.
E) it includes net exports.
117) One major reason that GDP is an inaccurate measure of the “quality of life” is that
A) people frequently buy things they do not want.
B) it does not include the value of leisure.
C) it is statistically very inaccurate.
D) it cannot be adjusted for changes in prices.
E) it includes net exports.
118) One reason that real GDP tends to overstate the economic well-being of the country’s residents is that it ignores
A) the costs of increased leisure time.
B) the market-based activity done from the home.
C) the economic “bads” associated with production, such as pollution.
D) non-market activities, such as teenaged-babysitting services.
E) illegal activities, such as the drug trade.
119) Measures of GDP may understate the economic well-being of people in developing countries if those countries tend to
A) import much more than they export.
B) have a high degree of foreign direct investment.
C) emphasize agricultural and resource-based production.
D) have very high rates of pollution.
E) have a large share of nonmarket activities.
120) Which of the following statements about the underground economy and how it relates to GDP is correct?
A) Activity in the underground economy is Canada is estimated at over 25% of the value of GDP, which therefore significantly understates total output.
B) Transactions in the underground economy are not legal, are not reported for tax purposes, and therefore not included in GDP.
C) Transactions in the underground economy are legal but are not reported for tax purposes, and therefore not included in GDP.
D) Activity in the underground economy is illegal and therefore should not be included in any measure of legitimate economic activity.
E) Transactions in the underground economy are legal and therefore an estimate of their total value is included in GDP.
121) Which of the following is included in current calculations of GDP?
A) computers produced here and exported to Europe
B) the value of a vintage automobile purchased from the previous owner
C) volunteer work
D) the value of vegetables consumed by the home gardener
E) welfare payments
122) Statistics Canada excludes from GDP the value of goods and services exchanged “under the counter” because
A) Statistics Canada is responsible for making an ethical decision about which activities to exclude from national income measures.
B) satisfactory methods for their measurement have not been developed.
C) their production has zero opportunity cost.
D) these goods are all intermediate goods.
E) these goods do not contribute to well-being.
123) Why are illegal activities, unreported activities, and non-market activities excluded from GDP?
A) They do not contribute to human welfare.
B) They do not have an opportunity cost.
C) They are difficult to measure.
D) The do not contribute to the true national output of goods and services.
E) They are morally repugnant.
124) Which of the following is excluded from GDP?
A) the labour services provided by a police officer in the narcotics squad
B) the purchase of new computers by a police department
C) the repairs to a police car after damage as a result of a high speed chase
D) the labour supplied by a lawyer to defend a suspect charged with a criminal offense
E) the purchase price of illegal drugs sold by a drug dealer
125) Using GDP as a measure of the economic well-being of a country can be criticized for ignoring non-market and other activities. However, it remains useful because
A) GDP is the best measure we have of the effects of economic “bads” on the well-being of the country.
B) the change in GDP from one year to the next is a good indication of what rates of inflation and unemployment will be.
C) it provides a good indication of household income distribution when measured from the income side.
D) the change that is measured in GDP from one year to the next is a good indication of the change in economic activity.
E) it is simply not possible to reform the current measure of GDP.
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