Question 1

Scenario: Sarah takes care of her son instead of sending him to a day care that charges $12,000 annually.
-Refer to the scenario above.Sarah's husband earns a salary of $70,000 per year.Which of the following will happen if her husband,instead of Sarah,quits his job to look after their son?

Accepted Answer

If Sarah's husband quits his job, the household income will decrease by $70,000. This will lead to a decrease in consumption spending, which is a major component of GDP. Therefore, the country's GDP will decrease by $70,000. Choices A, C, and D are not relevant to this scenario.

Question 2

Suppose that instead of Greg buying his lunch at a fast-food restaurant for $15.00,he buys $5 worth of food at the grocery store and spends an hour of his time creating his lunch.By how much would GDP change?

Accepted Answer

GDP would decrease by $10 because Greg's spending on lunch decreases from $15 to $5, and the time he spends making his lunch does not count towards GDP.

Question 3

Scenario: Mike's housekeeper charges $30 for mowing his lawn.
-Refer to the scenario above.Which of the following will happen if Mike decides to mow his lawn himself instead of paying his housekeeper for the service?

Accepted Answer

If Mike decides to mow his lawn himself instead of paying his housekeeper, there will be a decreased economic activity, which will result in a decrease in GDP. Therefore, the best choice is B. None of the other options are relevant to this scenario.

Question 4

10 percent of the total food grains produced in a country during a year gets damaged due to poor storage.Which of the following will happen in this case?

Accepted Answer

The market value of the damaged food grains will not be considered while calculating the country's GDP for that year. This is because GDP only measures the value of goods and services that are produced and sold in the market. Since the damaged food grains did not reach the market, they do not contribute to the country's economic activity and hence are not included in the calculation of GDP.

Question 5

Billy is a plumber.He earns $15 per hour.One morning,just before leaving for work,he found a leaky pipe in his kitchen.He spent 2 hours repairing the pipe.
a)How would this affect the calculation of GDP?
b)If Billy had spent 2 hours working for one of his clients,what would have been the effect of his activity on the calculation of GDP?

Accepted Answer

The answer of Billy is a plumber.He earns $15 per...

Question 6

Suppose that instead of Greg not mowing his lawn,he pays his son $10.00 cash.By how much would GDP change?

Accepted Answer

GDP measures the value of all final goods and services produced in an economy in a given period of time. In this case, the son's mowing of the lawn is a service that is being produced. The fact that Greg is paying his son $10.00 cash does not change the value of the service that is being produced. Therefore, GDP would not change.

Question 7

Scenario: Jane sewed a prom dress, which she could have bought for $180 from a store.
-Refer to the scenario above.Which of the following will happen if she keeps the dress for herself?

Accepted Answer

Keeping the dress for herself will not have any direct impact on the GDP of her country or the trade deficit/surplus. GDP measures the total value of goods and services produced in a country, and since Jane did not sell the dress, it does not contribute to the production of goods and services. Similarly, the trade deficit or surplus is determined by the difference between a country's imports and exports, and Jane's decision to keep the dress does not involve any international trade. Therefore, the GDP of her country will remain unchanged and there will be no impact on the trade deficit or surplus.

Question 8

Scenario: Mike's housekeeper charges $30 for mowing his lawn.
-Refer to the scenario above.Suppose that besides consuming all the potatoes grown on his farm,Edwin buys 5 pounds of potatoes at $0.80 per pound.What is likely to happen in this case?

Accepted Answer

CThe $4 spent by Edwin on potatoes is a market transaction for goods, which is included in the calculation of GDP. Additionally, the value of Edwin's total output, including the potatoes he grows and consumes, is part of the GDP as it represents production within the country.

Question 9

Scenario: Jane sewed a prom dress, which she could have bought for $180 from a store.
-Refer to the scenario above.Which of the following will happen if she sells it for $200 and the total cost incurred by her in making the dress was $150?

Accepted Answer

GDP is the total value of goods and services produced in a country within a given time frame. Jane's selling of the prom dress for $200 adds $200 to the economy, which is higher than the cost incurred in making the dress ($150). The difference between the selling price and the cost incurred is $50. Therefore, the GDP will increase by $50. Option A is incorrect because the dress was not produced in a store but produced by Jane, so it does not count towards the GDP. Option C is wrong because the sale of the dress increases the GDP. Option D is incorrect because trade surplus only applies to international trade, not a scenario where someone is making a single item to sell.

Question 10

Several houses built in a country during a certain year were mildly damaged because of an earthquake.Which of the following is likely to happen in this case?

Accepted Answer

Mild damage to houses due to an earthquake does not contribute to the production of goods and services in the country, and hence is not included in the calculation of the country's GDP. Only the value of final goods and services produced within a country's borders during a given period of time is included in the calculation of GDP.

Question 11

Scenario: Sarah takes care of her son instead of sending him to a day care that charges $12,000 annually.
-Refer to the scenario above.Which of the following will happen if Sarah opens a day care and takes care of five children,in addition to her son,charging $12,000 per year for each child?

Accepted Answer

By opening a day care and taking care of five additional children, Sarah will be earning $12,000 per child, and since she will be taking care of five children, she will earn a total of $60,000, which will add to the country's GDP. Therefore, the correct option is C. Option A is incorrect because a country's trade surplus does not increase or decrease due to a day care business. Option B is incorrect because the country's GDP will increase due to the income generated by Sarah's day care business. Option D is incorrect because a day care business does not have any impact on a country's trade deficit.

Question 12

Suppose that instead of Greg not mowing his lawn,he pays a lawn care business $20.00.He had to buy $5 in gas and took 1 hour of his time when he did it himself.By how much would GDP change?

Accepted Answer

The answer of Suppose that instead of Greg not mowing...

Question 13

Part of a bridge built by the government of Ritzland collapsed in the same year it was constructed.If the total cost of building the bridge was $4 million,which of the following will happen in this scenario,everything else remaining unchanged?

Accepted Answer

The construction of the bridge, despite its collapse, contributes to the GDP through government spending on infrastructure, thus increasing Ritzland's GDP by the amount spent on the construction.

Question 14

Which of the following is omitted in the calculation of GDP?

Accepted Answer

The answer of Which of the following is omitted in...

Question 15

Genovia produced 10 million tons of wheat in a particular year.Of this,1 million tons had to be thrown away because of a pest infestation.How would this affect the calculation of the GDP of the country for that year?

Accepted Answer

The answer of Genovia produced 10 million tons of wheat...

Question 16

Rita cooked a meal,which would have been worth $100 at the nearest eatery,for her family.What impact would this have on the calculation of GDP? Explain your answer.

Accepted Answer

The answer of Rita cooked a meal,which would have been...

Question 17

Scenario: Sarah takes care of her son instead of sending him to a day care that charges $12,000 annually.
-Refer to the scenario above.Which of the following will happen if she puts him into a day care?

Accepted Answer

If Sarah puts her son in day care and pays $12,000 annually, this will contribute to the country's GDP as it is a monetary transaction involved in the provision of services. Therefore, the country's GDP will increase by $12,000.

Question 18

30 percent of the electric bulbs produced in a factory in Xenonia during a year were found to be defective.Which of the following is likely to hold true in this scenario if everything else remains unchanged?

Accepted Answer

Defective bulbs are counted in production, inflating GDP figures without adding real value, leading to an overestimation.

Question 19

Scenario: Mike's housekeeper charges $30 for mowing his lawn.
-Refer to the scenario above.Which of the following will happen if Mike starts charging $30 to mow lawns that were previously mowed by their owners?

Accepted Answer

When Mike starts charging for a service that was previously not charged for, it becomes part of the formal economy and is counted in the GDP, leading to an increase in GDP.

Question 20

Scenario: Mike's housekeeper charges $30 for mowing his lawn.
-Refer to the scenario above.Suppose Edwin consumes the total output produced instead of selling part of it.What is likely to happen in this case?

Accepted Answer

When Edwin consumes the total output instead of selling part of it, the transaction does not contribute to the market economy, leading to a decrease in GDP since there's less economic activity being recorded.

Quiz 5: The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates

Scenario: Sarah takes care of her son instead of sending him to a day care that charges $12,000 annually. -Refer to the scenario above.Sarah's husband earns a salary of $70,000 per year.Which of the following will happen if her husband,instead of Sarah,quits his job to look after their son?

Suppose that instead of Greg buying his lunch at a fast-food restaurant for $15.00,he buys $5 worth of food at the grocery store and spends an hour of his time creating his lunch.By how much would GDP change?

Scenario: Mike's housekeeper charges $30 for mowing his lawn. -Refer to the scenario above.Which of the following will happen if Mike decides to mow his lawn himself instead of paying his housekeeper for the service?

10 percent of the total food grains produced in a country during a year gets damaged due to poor storage.Which of the following will happen in this case?

Suppose that instead of Greg not mowing his lawn,he pays his son $10.00 cash.By how much would GDP change?

Scenario: Jane sewed a prom dress, which she could have bought for $180 from a store. -Refer to the scenario above.Which of the following will happen if she keeps the dress for herself?

Scenario: Mike's housekeeper charges $30 for mowing his lawn. -Refer to the scenario above.Suppose that besides consuming all the potatoes grown on his farm,Edwin buys 5 pounds of potatoes at $0.80 per pound.What is likely to happen in this case?

Scenario: Jane sewed a prom dress, which she could have bought for $180 from a store. -Refer to the scenario above.Which of the following will happen if she sells it for $200 and the total cost incurred by her in making the dress was $150?

Several houses built in a country during a certain year were mildly damaged because of an earthquake.Which of the following is likely to happen in this case?

Scenario: Sarah takes care of her son instead of sending him to a day care that charges $12,000 annually. -Refer to the scenario above.Which of the following will happen if Sarah opens a day care and takes care of five children,in addition to her son,charging $12,000 per year for each child?

Suppose that instead of Greg not mowing his lawn,he pays a lawn care business $20.00.He had to buy $5 in gas and took 1 hour of his time when he did it himself.By how much would GDP change?

Part of a bridge built by the government of Ritzland collapsed in the same year it was constructed.If the total cost of building the bridge was $4 million,which of the following will happen in this scenario,everything else remaining unchanged?

Which of the following is omitted in the calculation of GDP?

Genovia produced 10 million tons of wheat in a particular year.Of this,1 million tons had to be thrown away because of a pest infestation.How would this affect the calculation of the GDP of the country for that year?

Rita cooked a meal,which would have been worth $100 at the nearest eatery,for her family.What impact would this have on the calculation of GDP? Explain your answer.

Scenario: Sarah takes care of her son instead of sending him to a day care that charges $12,000 annually. -Refer to the scenario above.Which of the following will happen if she puts him into a day care?

30 percent of the electric bulbs produced in a factory in Xenonia during a year were found to be defective.Which of the following is likely to hold true in this scenario if everything else remains unchanged?

Scenario: Mike's housekeeper charges $30 for mowing his lawn. -Refer to the scenario above.Which of the following will happen if Mike starts charging $30 to mow lawns that were previously mowed by their owners?

Scenario: Mike's housekeeper charges $30 for mowing his lawn. -Refer to the scenario above.Suppose Edwin consumes the total output produced instead of selling part of it.What is likely to happen in this case?