Question

19. Which of the following values would be included in U.S. GDP for 2006? a. the rent that John, an American citizen, would have paid on his home in New York in 2006 had he not owned that home b. the rent that Sarah, an American citizen, paid on her apartment in San Francisco in 2006 c. the value of the legal services provided by Carlos, an attorney and a Mexican citizen, who lived in Houston and practiced law there in 2006 d. All of the above would be included in U.S. GDP for 2006, 20. Which of the following statements about GDP is correct? a Nominal GDP values production at current prices, whereas real GDP values production at constant prices. b. Nominal GDP values production at constant prices, whereas real GDP values production at current prices. c. Nominal GDP values production at market prices, whereas real GDP values production at the cost of the resources used in the production process. d. Nominal GDP consistently underestimates the value of production, whereas real GDP consistently overestimates the value of production.

Answer 1

(19) John an American Citizen lives in Hew York on rent and pay rent for this in 2006. It would be included in US GDP for 2006.

The rent that Sarah, an American Citizen, paid on her apartment in San Francisco in 2006. It would be included in US GDP for 2006.

The value the Legal services provided by Carlos, an attorney and a Mexican citizen, who lived in Houston and practiced law there in 2006. Since, it is occurred within the national territory of US, it would be included in US GDP for 2006.

Answer: Option (D), i.e., all of the above would be included in US GDP for 2006.

(20) Nominal GDP measures values production at current prices.

Nominal GDP = Output produced in current year * Price in current year

Real GDP measures values production at constant price (i.e., base year price)

Real GDP = Output produced in current year * Price in base year.

Base year price remains constant.

Answer: Option (A)