Question 14 ct value of A Sales in an economy over a period

Question 14: ct value of A. Sales in an economy over a period of time B. Final goods and services produced in an economy over a period of time Capital accumulation in an economy over a period of time Consumers\' expenditures in an economy over a period of time Question 15: Intermediate goods are excluded from GDP because A. They represent goods that have never been purchased so they cannot be counted Their inclusion would understate GDP C.)Their inclusion would involve double counting The premise of the question is incorrect because intermediate goods are directly included in calculating GDP Question 16: If actual real GDP at the level of potential GDP, we can conclude that: A. Frictional unemployment is zero B. Structural unemployment is zero Cyclical unemployment is zero D. Natural rate of unemployment is zero Question 17: Identify which of the following statements is false: A. The inflation rate measures the percentage change in an economy\'s price index The inflation rate will be high only when the economy\'s price index is high Hyperinflation means a very high inflation rate D. Deflation means a negative value for inflation rate Question 18: Quality change\' bias: Means that new products are not introduced in the CPI Means that new products are introduced in the CPI Results in CPI overstating the rise in the cost of living C Results in CPI understating the rise in the cost of living

Solution

Ans.

14) B.

Gross domestic product is measure of total market value of final goods and services produced in an economy over a period of time.GDP only counts value of final products produced in a geographical boundary of a country.It sums the currency value of what has been produced in an economy over the year rather than what was actually sold. Thus it is a monetary measure where output is measured by summing the prices of all final goods and services produced in country.

15) C

Intermediate goods are excluded from GDP because they lead to double counting. These goods are used in production of final goods and services. The expenditures on intermediate goods are already included in market value of expenditure on final goods.So including expenditures on intermediate and final goods lead to double counting.

16) C.

If actual real gdp is at the level of potential gdp then cyclical unemployment rate is zero where frictional and structural unemployment exist.When actual gdp equals potential gdp unemployment rate is equal to natural unemployment rate.

17) B

The false statement is that inflation rate high only when economy\'s price index is high. There are many other causes of high inflation rate such as pressures on demand and supply side of economy, rise in production costs like high oil prices.Or if there is devaluation then import prices become expensive which leads to high inflation. So it is not only due to high price index.

18) D.

Quality change bias results in CPI overstating rise in cost of living.CPI includes change in quality of goods but sometimes change in quality of some product is not included. This is quality bias where CPI does not reflect completely about quality improvements. As over time technology advancement increases usefulness of product like useful of automobile tires has increased ,which decreases tire cost as basis on per mile but CPI does not include such improvement which tends to overstate rise in cost of living.