Question

15) The income approach to calculating GDP:

Multiple Choice

a)is less accurate than using the expenditure approach.

b)is simpler to calculate than the expenditure approach.

c)is more accurate than using the expenditure approach.

d)will generate the same answer as using the expenditure approach.

18) A depression is a:

Multiple Choice

a)recession that lasts more than eight quarters.

b)severe and extended period of recession.

c)recession that lasts more than three quarters.

d)recession that lasts more than four quarters.

23) Which of the following activities would be included in GDP?

Multiple Choice

a)You hire a cleaning service at $40 to clean your house.

b)Your roommate pays you $40 to clean the house.

c)Your parents send you $40 to hire a house cleaner, and you clean the house and keep the $40 yourself.

d)All of these would be included in GDP, since there was a monetary exchange.

25)The CPI is based on an:

Multiple Choice

a)average of the goods and services purchased by "rural consumers."

b)average of the two baskets of goods and services purchased both by "urban" and by "rural" consumers.

c)aggregated average meant to reflect the statistical average consumption.

d)average of the goods and services purchased by "urban consumers."

Answer 1

15. d) will generate the same answer as using the expenditure approach.

Income approach measures the total income earned by households in a year. Expenditure approach measures the total amount spent on the goods produced by a country in a year. Both the approaches yield the same answer as all expenditures in an economy should equal the total income. (Circular flow of income)

18. b) severe and extended period of recession.

Recession is an economic downfall or decline that lasts for six months to a year. When recession is prolonged (severe decline) that lasts for several years, then it is called depression.

23. a) You hire a cleaning service at $40 to clean your house.

GDP includes exchange of all goods and services in the market. Hiring a cleaning service is part of GDP, but if you do these task on your own, it will not be included in GDP.

25. d) average of the goods and services purchased by "urban consumers."

The Consumer Price Index (CPI) measures the weighted average of prices of a basket of consumer goods and services purchased by urban consumers.