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Exam 3: Measuring a Nations Well-Being

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Question 21

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Explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of GDP, but the value of intermediate goods produced and not sold is included directly as part of GDP.

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Intermediate goods produced and sold dur...

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Question 22

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In producing a sweater, a man who shears sheep pays a farmer R76 for a sheep's wool.The shearing shop sells the wool to a knitting mill for r₁33.The knitting mill makes it into a fine fabric and sells it to a sweater-making firm for R247.The sweater-making firm sells the sweater to a clothing store for R380, and the clothing store sells the sweater, gift wrapped, for R950.What is the contribution to GDP of the production and sale of the sweater?

A) R76
B) R836
C) R950
D) r₁805

E) B) and D)
F) B) and C)

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Question 23

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Suppose the government passes a law eliminating public holidays, resulting in increased production of goods and services.Based on this scenario, which of the following statements is correct?

A country with a larger GDP per person generally has a greater standard of living or quality of life than a country with a smaller GDP per person.

Changes in the GDP deflator reflect only changes in the prices of goods and services.

Nominal GDP employs current prices to value output while real GDP employs constant base-year prices to value output.

Suppose that population grows by 2 per cent.For the standard of living to rise, which of the following must occur?

For an economy as a whole, income equals expenditure because the income of the seller must be equal to the expenditure of the buyer.

An example of a transfer payment is

In the circular-flow diagram, payments for labour, land, and capital flow from firms to households through the markets for the factors of production.

The production of an apple contributes more to GDP than the production of a gold ring because food is necessary for life itself.

Gross Domestic Product can be measured as the sum of

The table below contains data for country A for the year 2014. $\begin{array}{|l|l|}\hline \text { Household purchases of durable goods } & € 1293 \\\hline \text { Household purchases of nondurable goods } & € 1717 \\\hline \text { Household purchases of services } & € 301 \\\hline \text { Household purchases of new housing } & € 704 \\\hline \text { Purchases of capital equipment } & € 310 \\\hline \text { Inventory changes } & € 374 \\\hline \text { Purchases of new structures } & € 611 \\\hline \text { Depreciation } & € 117 \\\hline \text { Salaries of government workers } & € 1422 \\\hline \text { Government expenditures on public works } & € 553 \\\hline \text { Transfer payments } & € 777 \\\hline \begin{array}{l}\text { Foreign purchases of domestically produced } \\\text { goods }\end{array} & € 88 \\\hline \text { Domestic purchases of foreign goods } & € 120 \\\hline\end{array}$ In 2014 what was country A's: a) GDP in 2010 b) Consumption c) Investment d) Government purchases e) Exports f) Imports g) Net exports

Figure 1 $\begin{array}{ccccc}\text { Year } & \begin{array}{c}\text { Price of } \\\text { pens }\end{array} & \begin{array}{c}\text { Quantity of } \\\text { pens }\end{array} & \text { Price of books } & \begin{array}{c}\text { Quantity of } \\\text { books }\end{array} \\\hline 2013 & \text { R57 } & 100 & \text { R190 } & 50 \\2014 & \text { R57 } & 120 & \text { R228 } & 70 \\2015 & \text { R76 } & 120 & \text { R266 } & 70\end{array}$ -Refer to FigurE?.What is the approximate percentage increase in prices from 2014 to 2015?

GDP per person tells us the income and expenditure of the

GDP would include which of the following?

In Europe, real GDP is substantially higher today than it was 60 years ago.What does this tell us, and what does it not tell us, about the well-being of Europeans?

Suppose that an economy produces 40,000 units of good A which sells at R76 a unit and 20,000 units of good B which sells at R95 per unit.Production of good A contributes

Which of the following would be counted in SA's GDP?

GDP does not make adjustments for leisure time, environmental quality, or volunteer work.