How could the omission of net exports from GDP overstate production? Or understate it?
What will be an ideal response?
The omission of net exports could cause the overstatement of production if net exports were negative, meaning imports are greater than exports. This means that more Americans are purchasing foreign goods than foreigners are purchasing American goods, so there is a drain on GDP that would not be noted if net exports were not included in GDP.
The opposite is true when the omission causes an understatement of GDP. In this case, net exports are positive or exports are greater than imports. This means that more foreigners are buying U.S. goods than Americans buying foreign goods. This would bolster GDP to a higher level than it would be if net exports were omitted.
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Assuming farmers can plant either corn or soybeans, as U.S. farmers plant more corn to meet rising global demand
A) the opportunity cost of producing corn increases. B) the opportunity cost of producing corn decreases. C) the U.S. PPF for corn and other goods and services shifts outward. D) the United States produces at a point beyond its PPF.
The amount of a particular good or service that buyers in a market will purchase at a given price during a specified period is called:
A. quantity demanded. B. quantity supplied. C. demand. D. supply.
In general, the larger the price elasticity:
a. the smaller the responsiveness of price to changes in quantity. b. the smaller the responsiveness of quantity to changes in price. c. the larger the responsiveness of price to changes in quantity. d. the larger the responsiveness of quantity to changes in price.
If capital flows freely between countries and a country has a fixed exchange rate, one thing you know is that the country:
A. exports more than it imports. B. cannot have a discretionary monetary policy. C. must have ample gold reserves. D. must be running large trade deficits