Describe the three different approaches to measuring the amount of economic activity that occurs during a period of time and explain why they all give identical measurements
What will be an ideal response?
The approaches are the product approach, which measures the amount of output produced; the income approach, which measures the incomes received by producers of output; and the expenditure approach, which measures the amount of spending by the ultimate purchasers of output. They give identical measurements because everything that is produced is purchased by someone, so the expenditure and product approaches must be equal, and because anything that is purchased means that someone is earning income in the same amount, so the expenditure and income approaches must be equal.
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The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system, and real variables are not
a. True b. False Indicate whether the statement is true or false
During periods of hyperinflation, which of the following is the most likely response of consumers?
a. Spend money as fast as possible. b. Lend money. c. Invest as much as possible. d. Save as much as possible.