Are there any measurement problems that occur with the GDP calculation? Explain.
What will be an ideal response?
GDP measures the value of output that is exchanged in the marketplace. Some production never reaches the market and thus is not included in the GDP calculation. (An example would be someone who cleans her own swimming pool instead of hiring a professional pool cleaning service.) There are also unreported activities that are not included in GDP, such as a person who mows lawns and does not report the income.
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Which of the following is a part of the sequence of events that links the change in the money supply by the Fed to investment demand?
a. An increase in the money supply lowers the interest rate, which in turn reduces the quantity of investment demanded. b. An increase in the money supply lowers the interest rate, which in turn increases the quantity of investment demanded. c. An increase in the money supply raises the interest rate, which in turn reduces the quantity of investment demanded. d. An increase in the money supply raises the interest rate, which in turn increases the quantity of investment demanded.
The recurrent ups and downs in the level of economic activity extending over several years are a description of a:
A. recession. B. business cycle. C. business trough. D. noncyclical fluctuation.
In the national income accounts, the purchases of durables, nondurables, and services by households are classified as:
a) consumption. b) investment. c) net exports. d) government purchases.
As long as income is above planned aggregate expenditure, unplanned inventory reductions have occurred.
Answer the following statement true (T) or false (F)