Briefly define real and potential GDP, and explain the relationship between real GDP and potential GDP. How can we measure potential GDP?
What will be an ideal response?
Real GDP is the actual level of GDP, adjusted for inflation. Potential GDP is what the GDP would be if the economy was fully employed. Because of the business cycle, real GDP fluctuates around potential GDP. Thus real GDP is sometimes greater than potential GDP, sometimes smaller than potential GDP, and sometimes equal to potential GDP. Over time, the larger-than-normal and smaller-than-normal values cancel out and we can estimate potential GDP by using the average of real GDP.
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In the extreme case of a complete crowding-out effect
A) an increase in interest rates will stimulate investment spending. B) an increase in government spending will not increase aggregate demand. C) an increase in tax rates will stimulate work effort. D) an increase in government spending will stimulate investment spending.
Discuss the difference between renewable and nonrenewable resources. Given an example of each
What will be an ideal response?
________ are the owners of a corporation
A) Bondholders B) The board of directors C) Stockholders D) Top management
A technique that can be employed to make a portfolio less risky than any of its individual securities is
a. plowback. b. diversification. c. programmed trading. d. speculation.