Answer the following questions true (T) or false (F)
1. If prices rise on average in the U.S. economy, the purchasing power of a dollar declines.
2. Using "chain-weighted" prices to calculate real GDP remedies the distortions causes by changes in relative prices over time.
3. If the GDP deflator is equal to 100, then for that year nominal GDP is equal to real GDP.
1. TRUE
2. TRUE
3. TRUE
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When a government has decided on a permanent spending increase, a valid reason to increase borrowing rather than taxes might be to ________
A) to avoid an unnecessary stimulus to aggregate demand B) to shift the burden from domestic taxpayers to foreign bond holders C) to avoid distortions that might reduce long-run aggregate supply D) to avoid an increase in income inequality
Normally, to the extent that a governmental control mechanism succeeds in affecting price, it can be expected to lead to a corresponding
a. reduction in the volume of sales only if the price is forced down. b. reduction in the volume of sales if the price is forced down and an increase in the volume of sales if the price is forced up. c. decrease in the volume of sales whether the price is forced up or down. d. increase in the volume of sales whether the price is forced up or down.