How is a price index computed?
What will be an ideal response?
A price index is computed by comparing the total price of a “market basket” of goods and services representing GDP in the given year to the total price of the same market basket in the base year. The given year’s total price is divided by the base year’s total price to arrive at the index figure. The index is expressed as a percentage, so if the base year’s prices are higher than the given year, the index will be less than 100. If the given year’s prices are higher than the base year, the index will be more than 100. The price index for the base year will always be 100 since the numerator and denominator will be the same when the given year and base year are the same.
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A firm's short-run average cost is defined as
a. the ratio of total output to short-run total cost. b. the ratio of short-run total cost to total output. c. the additional cost of producing one more unit of output while some input is fixed. d. the additional cost of producing one more unit of output while all inputs are fixed.
When the economy is in macroequilibrium, unintended investment
a. is positive b. is negative c. equals saving d. is zero e. equals intended investment
If the resources of an economy are being used inefficiently, it would be
a. possible to increase production of all goods simultaneously. b. possible to increase production of one good only if production decreased for the other goods. c. not possible to increase production of any good. d. not possible to increase economic growth. e. possible to increase production with no effort.
Total costs increase from $1,500 to $1,800 when a firm increases output from 40 to 50 units.. Which of the following are true?
a. AC rise by $1.00 b. AC fall by $1.50 c. AC rise by $1.50 d. AC fall by $1.00