Assume an economy that makes only one product and that year 3 is the base year. Output and price data for a five-year period are as follows. Answer the question on the basis of these data. year units of output price per unit 1 3 3 2 4 4 3 6 5 4 7 7 5 8 8 Refer to the above data. In determining real GDP, the nominal GDP for:
a) each year must be multiplied by the relevant price index.
b) years 1 and 2 must be inflated.
c) years 4 and 5 must be inflated.
d) years 1 and 2 must be deflated.
b) years 1 and 2 must be inflated.
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Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bert. According to Coase's theorem, the optimal level of trash in the park can be achieved if
A) Al is fined by the government. B) Al has the right to leave trash and Bert cannot do anything about it. C) Al has the right to leave trash and Bert can pay him to limit his dumping. D) Bert moves.
The self-correcting mechanism would be expected to be very rapid in an economy with
a. a large multiplier. b. flexible prices. c. rigid wages. d. high labor productivity.