Question Details

Which of the following would lead GDP to overstate economic welfare 



1) Which of the following is NOT included in real GDP?
A) production of services, such as the services of hair dressers
B) production of goods that last less than a year, such as production of hot dogs
C) production that takes place in the underground economy
D) production of goods that last more than a year, such as a pair of roller blades
2) The underground economy exists for all of the following reasons EXCEPT the
A) production of illegal goods.
B) avoidance of taxes.
C) desire to maintain accurate records of economic transactions.
D) avoidance of government regulation.
3) Because pollution reduces economic welfare, on this count real GDP as measured
A) decreases as pollution increases.
B) increases to take into account the expenditures that will be made in the future to clean up
the pollution.
C) overstates economic welfare.
D) understates economic welfare.
4) In the post World War II period, considerable growth in total production took place in the
United States. But at the same time, businesses were dumping their waste into the Great Lakes
with minimal cost to themselves, significantly polluting the bodies of water as a result. This
occurrence is an example where
A) real GDP gives an overly positive view of economic welfare.
B) real GDP gives an overly negative view of economic welfare.
C) investment would have been a better measure of total production.
D) the pollution counts as a final good.

5) Which of the following would lead GDP to overstate economic welfare ?
A) the existence of home-cooked meals
B) restaurant workers that under-report tip income
C) a self-employed CPA who takes a longer than normal vacation
D) electric utilities that switch to burning coal because of higher natural gas prices and
thereby create more acid rain pollution



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