macro_tif1_ch07

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Unformatted text preview: ry for You to Work In? 2. Gross domestic product understates the total production of final goods and services because of the omission of A) intermediate goods. B) inflation. C) exports. D) nonmarket household production. Answer: D Diff: 1 Type: MC Page Ref: To pic : 642/222 S S Conceptual Objective: LO2: Discuss whether GDP is a good measure AACSB Coding: of wellbeing Reflective Thinking Special Feature: None 3. Gross domestic product understates the total production of final goods and services because of the omission of A) exports. B) intermediate goods. C) the underground economy. D) inflation. Answer: C Diff: 1 Type: MC Page Ref: To pic : 642/222 S S Conceptual Objective: LO2: Discuss whether GDP is a good measure AACSB Coding: of wellbeing Reflective Thinking Special Feature: None 4. The size of the underground economy would tend to decrease if the government of a country A) made over-the- counter drugs illegal. B) decreased government regulations on businesses. C) increased income tax rates. D) increased business taxes. Answer: B Diff: 2 Type: MC Page Ref: To pic : 642-3/222-3 T S Conceptual Objective: LO2: Discuss whether GDP is a good measure AACSB Coding: of wellbeing Reflective Thinking Special Feature: None 5. The size of the underground economy would tend to increase if the government of a country A) increased income tax rates. B) legalized prostitution. C) decreased government regulations on businesses. D) legalized drugs. Answer: A Diff: 2 Type: MC Page Ref: To pic : 642/222 T S Conceptual Objective: LO2: Discuss whether GDP is a good measure AACSB Coding: of wellbeing Reflective Thinking Special Feature: None 6. Suppose works for Mary as a proofreader. Mary and Bob fall deeply in love, marry and have eight children. Bob Bob stops working for Mary in order to care for the children. What will be the effect on GDP? A) GDP will not change. B) GDP will increase. C) GDP will decrease. D) GDP may increase or may decrease depending on inflation. Answer: C Diff: 2 Type: MC Page Ref: To pic : 642-3/222-3 S S Conceptual Objective: LO2: Discuss whether GDP is a good measure AACSB Coding: of wellbeing Reflective Thinking Special Feature: None 7. Which of the following statements about the underground economy is true? A) The underground economy in developing countries amounts to less than 10% of measured GDP. B) Omitting underground economy production from measured GDP causes errors in GDP growth estimates in the long run. C) Income that is earned but not reported as income for tax purposes is included in the calculation of GDP. D) Most transactions that occur in the underground economy are included in the calculation of GDP. Answer: B Diff: 2 Type: MC Page Ref: To pic : 643/223 T S Conceptual Objective: LO2: Discuss whether GDP is a good measure AACSB Coding: of wellbeing Reflective Thinking Special Feature: None 8. The sector can be a significant drag on the economies of developing countries because the firms in the informal informal sector A) employ illegal immigrants from other countries. B) sell their goods and services to citizens in...
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