To avoid double counting when GDP is estimated, economists:
(a) Calculate using GDP deflator;
(b) Calculate using retail prices;
(c) Calculate the value added of production;
(d) Calculate using the prices of intermediate goods only.
Answer: (c) Calculate the value added of production;
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Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
Comment on the following: "The second welfare theorem says that we can get any efficient allocation to be an equilibrium allocation. If endowments are inequitably distributed in an economy, we can therefore redistribute among people and still get an efficient outcome. As a result, there is no policy trade-off between equity and efficiency."
What will be an ideal response?
If real GDP doubles and the GDP deflator doubles, then nominal GDP
a. remains constant. b. doubles. c. triples. d. quadruples.
Explain and show graphically how an increase in government spending affects the equilibrium interest rate in the market for loanable funds
What will be an ideal response?