Give an example that shows why price index has to be used to accurately calculate GDP statistics. Avoid using examples given in the text.
What will be an ideal response?
Examples will vary, but should show a thorough understanding of why price index
is used to calculate GDP statistics. Let’ s say Country A has a $100 million nominal
GDP in 2012 and $200 million nominal GDP in 2018. By just looking at these stats,
Country A seems to have had an economic boom from 2012 to 2018. However, during
this time, Country A had very high inflation. As a result, the currency used in 2018 does
not have nearly as much value as it did in 2012. To correct the inflated 2018 GDP, a
price index is used to show the 2018 GDP in terms of 2012 currency. By doing this,
people can accurately see what type of economic change happened in Country A from
2012 to 2018.
You might also like to view...
An open market ________ by the Fed increases the money supply, which leads to ________ interest rates and increased GDP
A) sale; decreased B) purchase; decreased C) purchase; increased D) sale; increased
Structural unemployment is the result of
A) technological change or foreign competition. B) normal labor market turnover. C) a slowdown in the rate of economic expansion. D) irresponsible workers with poor work habits. E) changing weather patterns through the year.
What is a mortgage? What were the important developments in the mortgage market during the years after 1970?
What will be an ideal response?
With the exception of during recessions, workers in Canada are eligible for unemployment benefits for about twice as long a period of time as workers in the United States. As a result
A) the unemployment rate in Canada is usually higher than in the United States. B) the opportunity cost of job search in Canada is lower than in the United States. C) frictional unemployment is higher, on average, in the United States than in Canada. D) the average duration of unemployment is longer in the United States than in Canada.