Why is it difficult to make accurate and valid comparisons of real GDP or GNP for different countries, and how do the World Bank and the IMF deal with these difficulties?
What will be an ideal response?
Difficulties arise for several reasons. Countries have their own currencies, and patterns of consumption and prices differ between countries. In some countries, consumption patterns vary based on the availability of certain goods and services. For example, in nations where land is scarce, housing prices can be higher than in nations where land is abundant. Developing nations can have much different price structures on non-traded goods than developed nations have. Services like housekeeping or yard maintenance are usually much less expensive in developing nations than in developed nations. The World Bank and the IMF make adjustments for consumption patterns and relative prices when they gather price data for comparable goods to use in measuring real GDP across nations.
You might also like to view...
When there is a decrease in labor supply, real wages are likely to
A) remain the same. B) decrease. C) increase. D) allow less leisure time.
When tastes are risk averse, an individual will always choose less risk over more risk.
Answer the following statement true (T) or false (F)
Since 1972, the world price of oil has been largely determined by OPEC, which controls about 75 percent of the world's proven oil reserves. Since 1972 the price of oil has
A) fluctuated. OPEC's situation is an example of a prisoner's dilemma. B) risen slowly, but steadily. Members of OPEC fear that if they raise the price of oil too quickly this will lead oil-buying nations to accuse OPEC of price gouging, which is illegal under international law. C) been tied by OPEC to the rate of inflation in the United States. If, for example, the rate of inflation is 5 percent in one year, OPEC will raise the price of oil by 5 percent the next year. D) steadily fallen through the 1970s, then risen continually in the years since then. OPEC's actions are an example of implicit collusion.
Identify some of the basic assumptions of monopoly