In making international comparisons of living standards using GDP, which of the following is not adjusted for in the calculation?
A. Purchasing power parity.
B. The quantity of resources available to the economy.
C. Population size.
D. Different currency values.
Answer: B
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With fixed exchange rates, perfect asset substitutability, and perfect capital mobility
A) the LM curve is horizontal. B) the LM curve is vertical. C) the BP curve is horizontal. D) the BP curve is vertical.
According to the permanent-income hypothesis, a permanent increase in a person's income will
A) increase consumption more than savings. B) increase savings more than consumption. C) be smoothed out to where the increases in consumption and savings are roughly equal. D) have the same effect on consumption as a transitory increase in income.
If Mexico experiences a period of stable prices while the United States experiences rapid inflation, what will happen in Mexico?
a. an increase in aggregate supply b. a decrease in aggregate supply c. a decrease in aggregate demand d. an increase in aggregate demand
The long-run aggregate supply curve shows that by itself a permanent change in aggregate demand would lead to a long-run change
a. in the price level and output. b. in the price level, but not output. c. in output, but not the price level. d. in neither the price level nor output.