Question

Which would NOT cause GDP to rise?

Group of answer choices

Between 1970 and 2000 the number of Americans in prison nearly quadrupled, causing government to increase its funding for prisons

Minimum wage rises from $7.25 to $8.25

A stock market boom

In the past decade more people are hiring maids to do the work they used to do themselves

The U.S. economy generates $_______ per year in economic activity. GDP includes all items produced and sold. T/F?

Group of answer choices

18 trillion, false

18 trillion, true

18 billion, false

18 billion, true

The value of GDP can be determined by adding together

Group of answer choices

Compensation of employees, interest, government purchases, and exports

Government purchases, consumption, business investment, and net exports

Compensation of employees, interest, corporate profits, and government purchases

Consumption, compensation of employees, net interest, and government purchases

Answer 1

At the time of calculation of GDP newly produced goods, final goods are included and sale and purchase of financial assets are not part of GDP.

The GDP can be defined the market value of all goods and services which are produced in the domestic territory of the country in the current financial years. GDP by Expenditure method

GDP=C+I+G+(X-M)

When the minimum wage rises from $7.25 to $8.25, then hiring labor becomes costly and unemployment increases, so consumption decrease. On the other hand, when wage is high, those are employed, their earning increases, so consumption increases. It means effect of minimum wage on the GDP is ambiguous. Hence it will not leads to an increase in the GDP.

Hence option second is the correct answer.

2.

At the time of calculation of GDP newly produced goods, final goods are included and sale and purchase of financial assets are not part of GDP.

The U.S. economy generates $18 trillion per year in economic activity.

GDP includes all items produced and sold. It is false because it includes only newly produced goods and services.

Hence option first is the correct answer.

3.

Since GDP= Consumption + planned real investment + government expenditure+ export- import

Hence it can be said that the value of GDP can be determined by adding together Government purchases, consumption, business investment, and net exports.

Hence option second is the correct answer.