Explain the relationship between potential GDP and real GDP in the United States since the early 1960s. You do not need to tell what happened during any specific year; just describe the general relationship
What will be an ideal response?
Potential GDP has grown over the period, albeit at a slower rate over the past 3 decades, while the level of real GDP has fluctuated around potential GDP throughout.
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A consumer purchases housing (H) and spends the remainder of income on the composite good (C). The government is considering one of two policies. Policy A taxes housing by $50 per unit consumed
With the tax in place, the consumer purchases 100 units of housing. Policy B collects a lump-sum tax of $5,000 from the consumer's income. Compare the effects of the policies on the consumer's utility/well-being and the amount of housing and composite goods purchased.
Purchasing power parity exists when domestic currency:
a. maintains a fixed exchange rate with foreign currency. b. is not convertible into foreign currency. c. buys more goods at home than abroad. d. buys as many goods at home as it does abroad. e. appreciates in value against foreign currency.