In what ways is GDP a misleading measure of economic performance? Consider what components are not included on GDP.
What will be an ideal response?
Answer: GDP can be defined as the sum of the value of products & services produced in an economy in a year. When considering the historical GDP data, we can know the trend of the growth of the economy. However, this is not a sufficient measure of economic performance. When per capita GDP is calculated, the population is taken into account and so it is a better measure of economic performance and the general well-being of a country's citizens. Nonetheless, it is just an average and so it doesn't measure the distribution of income.
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In a constant-cost industry, price always equals
A) LRMC and minimum LRAC. B) LRMC and LRAC, but not necessarily minimum LRAC. C) minimum LRAC, but not LRMC. D) LRAC and minimum LRMC. E) minimum LRAC and minimum LRMC.
What is a multiplier? How does the multiplier effect occur?
What will be an ideal response?
Cost-push inflation occurs because of a:
a. Leftward shift in the aggregate demand curve b. Rightward shift in the aggregate demand curve c. Leftward shift in the aggregate supply curve d. Rightward shift in the aggregate supply curve
If the Federal Reserve wished to engage in contractionary monetary policy, it could
A. lower the reserve ratio. B. lower the Federal Funds rate target. C. increase the primary credit rate. D. purchase government debt.