How is leisure treated in the calculation of GDP of an economy? Does such a calculation imply that GDP is good measure of well-being? Why or why not?
What will be an ideal response?
The GDP accounts give an economy no credit for producing leisure. However, most people would agree that leisure is a key ingredient in human well-being. For example, in time-use surveys, people report that they are happiest when they are with friends socializing. Likewise, people report that they are the least happy when they are commuting to and from work. Of course, the goal in life is not to maximize your income by working every moment that you can. If that were our goal, nobody would ever retire or take a vacation. A more reasonable goal is to maximize human well-being. This is another example of optimization. GDP tells us how many material goods are being produced by an economy, but it does not tell us whether all of those material achievements are being used to optimize human happiness.
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If the Federal Reserve raises the U.S. interest rate, foreigners'
A) demand for U.S. dollars will increase and the exchange rate will rise. B) demand for U.S. dollars will decrease and the exchange rate will fall. C) demand for U.S. dollars will increase and the exchange rate will fall. D) demand for U.S. dollars will decrease and the exchange rate will rise.
The elasticity of supply is calculated by
A. determining the slope of the supply curve. B. dividing the absolute change in quantity supplied by the absolute change in price. C. dividing the percentage change in quantity supplied by the percentage change in price. D. dividing the percentage change in price by the percentage change in quantity demanded.
By engaging in quantitative easing, the Fed is attempting to reduce the ________, causing the MP curve to ________
A) term premium and the real interest rate; shift down B) unemployment rate and the inflation rate; shift down C) short-term nominal and real interest rates; shift up D) federal funds rate; shift up
We can tell from data in exhibit 9-2 that planned investment is autonomous because
What will be an ideal response?