Question

Question 71 pts

The business cycle is a short run phenomenon.

True

False

Flag this Question

Question 81 pts

In evaluating an economy's performance over a period of years, real GDP provides a better measurement than nominal GDP in part because

nominal GDP is distorted by its failure to show qualitative improvements in the products.

real GDP is adjusted for the nonmonetary social and environmental costs of production.

real GDP includes homeproduced / homeconsumed output which is uncompensated.

nominal GDP reflects changes in prices as well as changes in output.

Flag this Question

Question 91 pts

We deliberately choose to omit some factors from GDP such as:

Government purchases

Purely financial transactions

Final goods

All of the above.

Flag this Question

Question 101 pts

Which of the following do we WANT to leave out of GDP?

the resale of used goods.

production in the underground economy.

quality of life variables.

all of the above.

Answer 1

Question 7. False. The business cycle is not a short run phenomenon because it exhibits a cycle of recession and expansion followed by boom and depression that takes a fairly long time.

Question 8. Real GDP is much better because while on one side, nominal GDP reflects changes in prices as well as changes in output, it is the real GDP that keeps the price level fixed and measures only the production.

Question 9. Purely financial transactions are avoided to be counted in GDP because these are in the nature of merely paper transaction and have no association with production of goods and services

Question 10. We do not want to add the resale of used goods because they represent the intermediate goods and we cannot count them as they are already counted when sold by the first firm.