Intermediate Goods and GDP Calculation Quiz

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What does GDP include according to the text?

The value of both intermediate and final goods

The value of intermediate goods

The value of final goods only (correct)

The value of raw materials

Why are intermediate goods not included in GDP?

Their value is already included in the price of final goods (correct)

To keep the GDP calculation simple

Intermediate goods are difficult to measure accurately

Because they are less valuable than final goods

How is the value added of a firm calculated?

By dividing the output value by the number of employees

By subtracting the value of intermediate goods from the output value (correct)

By adding the value of intermediate goods to the output value

By multiplying the output value with the price per unit

What would happen if intermediate goods were included in GDP calculations?

GDP would be overestimated Signup and view all the answers

In the case of the hamburger example, what is the total value added?

$2 Signup and view all the answers

Why is it important to include only final goods in GDP calculations?

To avoid double counting Signup and view all the answers

What term is used to describe an estimate of the value of goods and services not sold in the marketplace?

Imputed value Signup and view all the answers

Why does GDP include imputed rent for homeowners who own their homes?

To account for the housing services enjoyed by homeowners Signup and view all the answers

Which group provides services that are difficult to assign a value to because they are not sold in a marketplace?

Police officers, firefighters, and senators Signup and view all the answers

How is imputed rent for homeowners included in GDP calculations?

As part of both the homeowner's expenditure and income Signup and view all the answers

What is the purpose of using imputations in valuing government services?

To address the lack of market prices for these services Signup and view all the answers

Why is it necessary to estimate the value of goods and services not sold in the marketplace for GDP calculations?

To accurately reflect the total economic output Signup and view all the answers

Which of the following is NOT included in GDP calculations?

Imputed rent on cars Signup and view all the answers

What is the underground economy?

The part of the economy that people hide from the government, whether for tax evasion or legality reasons Signup and view all the answers

Why are imputations not made for certain services like meals cooked at home?

To simplify GDP calculations Signup and view all the answers

What happens if imputations for all services and goods were made in GDP calculations?

It would overstate the actual economic output Signup and view all the answers

Why is GDP considered an imperfect measure for comparing standards of living across countries?

Because imputations are only approximate and some values are completely left out Signup and view all the answers

In which type of economy is the underground economy estimated to be more than half as large as the official economy in some countries?

Developing nations such as Thailand, Nigeria, and Bolivia Signup and view all the answers