What are the shortcomings of using changes in per capita real GDP to measure economic growth?
What will be an ideal response?
GDP does not include all goods and services that people consider valuable. Household production is left out, as is the value of leisure. GDP also does not take into consideration cultural and spiritual aspects of life. To the extent economic growth is accompanied by environmental degradation, it is not all a gain. And finally, the level of per capita real GDP does not provide information about how the income is distributed across the population.
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A poverty trap is:
A. what develops when poor nations save "too much." B. a self-reinforcing mechanism that causes the poor to stay poor. C. what develops when nations devote too much to foreign aid and not enough to domestic poverty. D. the lowest quartile of income earners in a given country, because it is highly unlikely they will ever move out regardless of policy.
Elasticity of demand will ____ as the availability of substitutes ____
a. increase; decreases b. decrease; increases c. increase; increases d. remain unchanged; decreases
Capital is a good used in the production of goods that households consume
Indicate whether the statement is true or false
A local business sells its product for $40 each in a competitive price-taker market. At its present rate of output, it's marginal cost is $40, average variable cost is $45, and average total cost is $60 . The business should
a. increase output b. reduce output but not to zero c. maintain the present rate of output d. shut down e. raise the price