Give an example that shows why price index has to be used to accurately calculate GDP statistics. Avoid using examples given in the text.
What will be an ideal response?
Examples will vary, but should show a thorough understanding of why price index
is used to calculate GDP statistics. Let’ s say Country A has a $100 million nominal
GDP in 2012 and $200 million nominal GDP in 2018. By just looking at these stats,
Country A seems to have had an economic boom from 2012 to 2018. However, during
this time, Country A had very high inflation. As a result, the currency used in 2018 does
not have nearly as much value as it did in 2012. To correct the inflated 2018 GDP, a
price index is used to show the 2018 GDP in terms of 2012 currency. By doing this,
people can accurately see what type of economic change happened in Country A from
2012 to 2018.
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The introduction of human capital to the Solow neoclassical growth model reduces the significance of the contribution of ________ to increases in per capita income
A) K B) L C) K and L D) None of the above.
How does investment in capital goods and infrastructure contribute to economic growth?
Please provide the best answer for the statement.