Until recently, George lived in a home that was newly constructed in 2005. In 2005, he paid $200,000 for the brand new house. He sold the house in 2006 for $225,000. Which of the following statements is correct regarding the sale of the house?
What will be an ideal response?
The 2006 sale affected neither 2005 GDP nor 2006 GDP.
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Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product
Indicate whether the statement is true or false
The consumer price index (CPI) tends to understate the true rate of inflation
a. True b. False Indicate whether the statement is true or false
Suppose the nominal interest rate is 10 percent annually, and you deposit $1,000. Inflation in the economy throughout the year is 6 percent. At the end of the year, you have earned:
A. a real rate of return of 4 percent. B. an increase in your purchasing power. C. a nominal increase in your savings of $100. D. All of these statements are true.
In the short-run macro model, if firms produce more output than they sell, those firms will
a. increase the prices of their products b. decrease their output c. increase their output d. cut back on their consumption spending e. increase the prices of their products and reduce the amount of output they produce