Why is it important to distinguish nominal GDP from real GDP?
What will be an ideal response?
A distinction between nominal GDP and real GDP is important to know whether the economy has really grown or not. Only increases in real GDP indicate a true expansion in our nation's production that may translate into an increase in our average absolute standard of living.
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Economists account for changes in tastes for a good as:
A. irrelevant for the demand curve. B. shifts in the demand curve. C. not demonstrable on the demand curve. D. movements along the demand curve.
As the accounting industry expands, the demand for certified public accountants (CPAs) also increases, which causes the salaries of CPAs to increase. This is an example of
A. diseconomies of scale. B. increasing marginal returns. C. economies of scale. D. constant returns to scale.
Stock and Watson found that monetary policy was responsible for about ________% of the reduction in output volatility that occurred in the mid-1980s
A) 0 to 10 B) 10 to 20 C) 20 to 30 D) 30 to 40
Assume that a central bank with a history of inflation announces that it is going to reduce money growth and inflation. According to the rational expectations model, the public will
a. immediately reduce their expected price level and inflation. b. reduce their expected price level if this announcement is credible. c. reduce their money and real wages if this announcement is credible. d. immediately be open to reducing their money wage. e. both b and c.