A. If all quantities produced rise by 5 percent and all prices fall by 5 percent, which of the following best describes what occurs?

a. Real GDP rises by 5 percent, while nominal GDP falls by 5 percent.

b. Real GDP rises by 5 percent, while nominal GDP is unchanged.

c. Real GDP is unchanged, while nominal GDP rises by 5 percent.

d. Real GDP is unchanged, while nominal GDP falls by 5 percent.

B. I f Mr. Keating quits his job as a teacher to home school his own children, GDP

a. stays the same because he is engaged in the same activity.

b. rises because he now pays lower income taxes.

c. falls because his market income decreases.

d. could rise or fall, depending on the value of home

schooling.

C. GDP is an imperfect measure of well-being because it

a. includes physical goods produced but not intangible services.

b. excludes goods and services provided by the government.

c. ignores the environmental degradation from economic activity.

d. is not correlated with other measures of the quality of life.