The GDP tends to:

1.   ?    overstate economic welfare because it does not include certain nonmarket activities such as the productive work of housewives.
2.   ?    understate economic welfare because it includes expenditures undertaken to offset or correct pollution.
3.   ?    understate economic welfare because it does not take into account increases in leisure.
4.   ?    overstate economic welfare because it does not reflect improvements in product quality.

Assume that the size of the underground economy increases both absolutely and relatively over time. As a result:

1.   ?    real GDP will rise more rapidly than nominal GDP.
2.   ?    GDP will tend to increasingly understate the level of output through time.
3.   ?    GDP will tend to increasingly overstate the level of output through time.
4.   ?    the accuracy of GDP will be unaffected through time.

In determining real GDP economists adjust the nominal GDP by using the:

1.   ?    national productivity index.
2.   ?    wholesale (producers') price index.
3.   ?    GDP price index.
4.   ?    consumer price index.

f real GDP rises and the GDP price index has increased:

1.   ?    the percentage increase in nominal GDP must have been less than the percentage increase in the price level.
2.   ?    nominal GDP may have either increased or decreased.
3.   ?    nominal GDP must have increased.
4.   ?    nominal GDP must have fallen.
   

If nominal GDP in some year is $280 and real GDP is $160. The GDP price index for that year is:

1.   ?    175.
2.   ?    57.
3.   ?    160.
4.   ?    280.

In comparing GDP data over a period of years, a difference between nominal and real GDP may arise because:

1.   ?    of changes in trade deficits and surpluses.
2.   ?    the length of the workweek has declined historically.
3.   ?    the price level may change over time.
4.   ?    depreciation may be greater or smaller than gross investment.

Nominal GDP was $130 and $150 in years 1 and 2 respectively. Real GDP was $100 and $110 in years 1 and 2 respectively. On the basis of this information we can conclude that:

1.   ?    the price level increased between years 1 and 2.
2.   ?    more intermediate goods were produced in year 1 than in year 2.
3.   ?    the increase in nominal GDP between years 1 and 2 understated the increase in production which occurred.
4.   ?    the price level declined between years 1 and 2.

A price index can rise from one year to the next even though:

1.   ?    some individual prices in the economy fall.
2.   ?    nominal GDP falls.
3.   ?    real GDP falls.
4.   ?    all of the above occur.

Nominal GDP is adjusted for price changes through the use of:

1.   ?    the Consumer Price Index (CPI).
2.   ?    the Producer Price Index (PPI).
3.   ?    the GDP price index.
4.   ?    exchange rates.

If personal income exceedes national income in a particular year, we can conclude that:

1.   ?    transfer payments exceeded the sum of social security contributions, corporate income taxes, and indirect business taxes.
2.   ?    the sum of social security contributions, corporate income taxes, and undistributed corporate profits exceeded transfer payments.
3.   ?    consumption of fixed capital and indirect business taxes exceeded personal taxes.
4.   ?    transfer payments exceeded the sum of social security contributions, corporate income taxes, and undistributed corporate profits.