The GDP deflator is not a fixed-quantity price index, but the CPI is. What is the significance of this fact?
A) The GDP deflator does not include enough items in its market basket.
B) A base year cannot be defined for the GDP deflator.
C) The GDP deflator reflects not only changes in prices, but also changes in consumption patterns as consumers substitute between goods.
D) The GDP deflator overstates the true rate of inflation, whereas the CPI understates it.
C
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If firms in a monopolistically competitive industry are making an economic profit, then
A) some customers will exit the market. B) some workers will leave the industry's labor force. C) some firms will leave the industry. D) new firms will enter the industry.
Assuming that C = $6,200, I = $1,300, G = $1,100, Exports = $630, Imports = $750, and Depreciation = $600 (all in billions of dollars), GDP equals $7,880
Indicate whether the statement is true or false
The supply for products that exhibit cost externalities is generally ________ the supply for products that do not
A) greater than B) less than C) the same as D) greater or less (depending on the market) than
Suppose that the government wishes to finance a one-year war. GDP in the nation before the war is $1,000 . and there are no taxes, no government spending, and no private saving. Private consumption is $1,000 . The government chooses to finance the war by selling Treasury bonds totaling $100 at 10 percent interest. The result is that private consumption becomes
a. $100 b. $900 c. $990 d. $1,000 e. $1,100