The GDP in the economy of Ponziland was $5 billion in the year prior to the frauds (year 1). The economy were growing at 4 percent. Frauds during the year reduce aggregate income by $200 million. During the year, the economy has:
a. shrunk by 1 percent.
b. grown by only 1 percent.
c. remained flat.
d. grown by 4 percent.
c
FEEDBACK: a. Incorrect. Since the frauds reduce aggregate income by $200 million, the GDP in year 2 is only $5 billion (as against what would have been $5.2 billion at 4 percent growth), and the economy has remained flat.
b. Incorrect. Since the frauds reduce aggregate income by $200 million, the GDP in year 2 is only $5 billion (as against what would have been $5.2 billion at 4 percent growth), and the economy has remained flat.
c. Correct.
d. Incorrect. Since the frauds reduce aggregate income by $200 million, the GDP in year 2 is only $5 billion (as against what would have been $5.2 billion at 4 percent growth), and the economy has remained flat.
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