GDP understates the value of output produced by an economy because it:
A. includes transactions that do not take place in organized markets, such as home-cooked meals.
B. excludes value added from the underground economy, such as tips taken "under the table."
C. includes environmental degradation caused by increased output production.
D. excludes the value of the wages and benefits of government employees.
Answer: B
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Two nations, Alpha and Beta, can both produce steel. Alpha has a comparative advantage in the production of steel if it
A. has a higher domestic opportunity cost of producing steel than Beta. B. uses more steel than Beta. C. can produce more steel than Beta. D. has a lower domestic opportunity cost of producing steel than Beta.
What is the reason that stabilization policies do NOT have an immediate effect on an economy?
A) Consumers are slow to catch up on spending. B) Imports come into the country too fast. C) Exports often are not shipped fast enough. D) There is a time lag for policies to take effect.
If the current price level is lower than the equilibrium price level, then it must be true that total planned
A) government spending is less than total planned tax revenues. B) government spending exceeds total planned tax revenues. C) real expenditures are less than total planned production. D) real expenditures exceed total planned production.
Refer to the following graph. Which of the following reflects government expansionary fiscal or monetary policy which would fail to increase real income?
a. An increase in aggregate demand from AD1 to AD2.
b. An increase in aggregate demand from AD2 to AD3.
c. An increase in aggregate demand from AD3 to AD4.
d. An increase in aggregate demand from AD4 to AD5.