How does U.S. gross domestic product (GDP) differ from U.S. gross national product (GNP)?
a. GNP = GDP - losses from depreciation
b. GNP = GDP + income earned by U.S. citizens abroad - income that foreign citizens earned in the U.S.
c. GNP = GDP + transfer payments to households + - indirect sales taxes
d. GNP = GDP - depreciation - retained earnings
b
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The CPI assumes a fixed basket of goods over time. In fact, consumers are likely to change purchasing behavior over time by purchasing less of the goods whose prices have risen by relatively large amounts and by buying more of the goods whose prices have risen less or maybe even fallen. What problem does this cause for measuring the cost of living?
Using Figure 1 above, if the aggregate demand curve shifts from AD3 to AD2 the result in the short run would be:
A. P3 and Y1. B. P2 and Y1. C. P2 and Y3. D. P1 and Y2.