Question

Which of the following suggest that real per capita GDP is not a perfect measure of economic well-being?
a. population varies across counties
b. GDP does not measure the value-added created during home production
c. GDP does not take into account the income distribution
d. GDP underestimates the value of goods and services produced in the economy because of inflation
e. GDP inaccurately measures the value of goods and services produced by the government

When do we say that the economy is in a recessions? (select ALL the correct answers)

a. When the the economy is in distress.

b. When GDP is below its trend

c. When real per capita GDP is below its trend

d. When the economy exhibits two consecutive quarters of negative real per capita GDP growth

e. When unemployment is unusually high

Answer 1

Which of the following suggest that real per capita GDP is not a perfect measure of economic well-being?

Correct options are:

b. GDP does not measure the value-added created during home production: Example is : own work on repairing and improving one’s home
c. GDP does not take into account the income distribution: Income inequality is not considered in GDP calculations. It may be considered in Gini coefficient.
Option d is incorrect as Real GDP is adjusted by using price deflator against inflation. Option a is incorrect as it is not a limitation. Option e is incorrect as accurate information availability can correct this problem.
When do we say that the economy is in a recessions? (select ALL the correct answers) b. When GDP is below its trend. This is begining of recession. d. When the economy exhibits two consecutive quarters of negative real per capita GDP growth: This is a formal definition of recession. e. When unemployment is unusually high: Recession is also charactrised by falling employment. Option a is incorrect as distress is not defied. Option c is incorrect as real GDP is considered and not real GDP per capita.