ates m a given time period 5. When using the income approach to measure GDP at m

Question

ates m a given time period 5. When using the income approach to measure GDP at market prices, in a ddi- tion to summing all factor incomes it is necessary to A. subtract depreciation because profit is not reported as net profit B. add depreciation because capital depreciates when goods are manufactured C. add indirect taxes less subsidies to convert aggregate income from factor cost to market prices add a statistical discrepancy which is the sum of depreciation and indirect taxes less subsidies 6. The following statements about the business cycle are correct except A. it is a regular predictable cycle in real GDP around potential GDP B. from the peak to the trough, the economy is in a recession C. from the trough to the peak, the economy is in an expansion D. it is a periodic movement in economic activity including employment 7. Real GDP per person is not an accurate measure of the standard of living because it A. includes the goods and services that governments b B. omits the goods and services that people produce for themselves C. includes goods and services bought by firms D. omits the goods and services imported from other countries uy

Explanation / Answer

5. C. GDP is the market value of all goods and services produced within territorial boundaries of an economy during a year. To convert it to market price, we need to add net indirect taxes.

6. a. Business cycle is a wave like motion which moves from expansion to depression with time. It is highly unpredictable.

7. B. GDP does not include services provide to yourself because it cannot be calculated monetarily. Hence, real GDP per person is not the accurate measure.

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