SOLVED

11) Which of the following statements is true? A) A decrease in the crime rate increases GDP as people will spend more on security. B) Household production is counted in GDP as it amounts to real production. C) GDP accounting rules do not adjust for production that pollutes the economy. D) GDP growth distributes income equally to people in the economy. 12) Which of the following is likely to increase measured GDP? A) A greater number of women decide to stay at home and provide day care for their children under age 5. B) Marijuana becomes legal to grow and sell. C) Tax rates increase and more people attempt to underreport their income for tax purposes. D) More people decide to do their own lawn maintenance and give up using a professional service. 13) The U.S. work week has declined from 60 hours in 1890 to 40 hours today. The impact of the decline in working hours A) increases U.S. GDP and increases the well-being of a typical working person in the U.S. B) increases U.S. GDP and decreases the well-being of a typical working person in the U.S. C) decreases U.S. GDP and increases the well-being of a typical working person in the U.S. D) decreases U.S. GDP and decreases the well-being of a typical working person in the U.S. 14) A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements. This will A) increase GDP and increase well-being in the economy. B) increase GDP and decrease well-being in the economy. C) decrease GDP and increase well-being in the economy. D) decrease GDP and decrease well-being in the economy. 15) Which of the following is not a true statement about the impact of World War II on the U.S. economy? A) U.S. GDP increased dramatically from 1941 to 1945. B) The war time years were a period of prosperity for U.S. consumers. C) More than 40% of the labor force was in the military or producing war goods. D) Increased production of tanks, ships, planes, and munitions accounted for most of the increase in GDP. 16) Statistics on real GDP during World War II may give a misleading indication of whether World War II was a period of prosperity because A) inflation may have been considerably higher than estimated. B) most of the increased production was for military goods, not consumption goods. C) government agents purposely inflated the production numbers to maintain American support for the war. D) government agencies were shorthanded and did a particularly poor job of collecting data. 17) Increases in real GDP would overstate the increase in the well-being of a country over time if, over that time period, the A) average hours worked per week increased. B) amount of pollution decreased. C) price level increased. D) crime rate decreased. 18) Increases in real GDP would understate the well-being of a country over time if, over that time period, the A) crime rate increased. B) percentage of people addicted to illegal drugs increased. C) amount of pollution decreased. D) average hours worked per week decreased. 19) If GDP calculations included measurements of pollution and environmental damage, GDP values would most likely be A) greater than their values without these measurements. B) less than their values without these measurements. C) unchanged from their values without these measurements. D) meaningless, since GDP values without these measurements would no longer be of value. 20) Presently, GDP is ________ to compensate for the costs of environmental damage. A) fully adjusted B) partially adjusted C) adjusted on a chain-weight basis D) not adjusted 21) Developing countries with large informal sectors tend to have firms that invest less in capital equipment. 22) If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy. 23) Real GDP per capita is calculated by dividing the value of real GDP for a country by the country’s adult population. 24) The underground economy— the informal sector —can be a significant drag on the economies of developing countries. Why are firms in the informal sector often less efficient than firms in the formal sector? 25) Even though it is generally true that the more goods and services people have, the better off they are, GDP provides only a rough measure of well-being. Assuming language is not an issue, what other factors besides GDP might you consider when deciding where to live and work? 26) Over the last 50 years, has the ratio of household production to gross domestic product in the United States increased or decreased? Consider the effect of the increased number of women working outside the home, and the effect of advances in technology in household production such as microwaves, coffee makers, power tools, etc.