List and discuss various types of goods and services omitted from measured GDP
What will be an ideal response?
Household production, such as preparing meals and taking care of children, includes productive activities but does not involve market transactions. Therefore, household production is omitted as part of GDP. Underground production, such as working for cash to avoid taxes or engaging in illegal activities, is not reported to the government and hence is not counted as part of GDP. Leisure time and preserving and improving the natural environment are not production per se but are clearly economic goods. They are not counted as part of GDP because it is hard to quantify and put a monetary value on them.
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Describe the principal costs of unemployment. Are there any benefits to unemployment?
What will be an ideal response?
The quantity equation makes the demand for money depend on
A) the unemployment rate and the level of interest rates. B) the inflation rate and the unemployment rate. C) interest rates and the unemployment rate. D) None of these.
If the intersection of the IS curve with the horizontal axis comes at a level of output below the natural level of output, the Fed
A) can easily bring the economy back to the full-employment level of output. B) loses control of the economy. C) must use contractionary model policy to correct economic problem. D) must decrease money supply and ignore interest rates.
Which of the following offers the best example of an external cost?
a. The opportunity cost of money that an entrepreneur has invested in her business b. The payments to owners of labor resources and coal inputs used by a coal-burning electric generating facility c. The price paid by households for electricity service, including both the electricity itself and the cost of transporting the electricity through power lines d. The harms to private property, open-access resources, and human health caused by pollution byproducts of electricity production