Why does real GDP have limitations in determining economic welfare?
What will be an ideal response?
First economic welfare is a broad concept of economic well-being that entails all goods and services not just those measured by GDP. These include production in the home and within the underground economy. Secondly, items such as leisure time are all aspects that are highly desirable and count for economic welfare yet are not measured by GDP. Lastly, environmental quality is highly desired yet real GDP growth could actually reduce the quality of the environment. So for all these reasons, economic growth is not totally determined by real GDP.
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Public goods represent ________ because by their very nature they are nonexcludable and nonrival which makes it difficult for the private sector to supply them profitably.
A. a negative externality B. a positive externality C. efficient production D. a market failure
Ravi notices that all of his neighbors who own cats are also divorced, and concludes that cat ownership must result in divorce. Ravi is
A. correct in his analysis. B. describing regression discontinuity. C. describing difference-in-differences. D. confusing correlation and causation.
The way it is typically drawn, what does the slope of the aggregate production function imply?
A) Diminishing marginal product of labor B) Diminishing marginal product of capital C) Increasing returns to scale D) Decreasing returns to scale
In a free market economy, the decisions of buyers and sellers are:
A. coordinated by the government. B. random. C. motivated by custom and tradition. D. guided by prices.