Are there any measurement problems that occur with the GDP calculation? Explain.
What will be an ideal response?
GDP measures the value of output that is exchanged in the marketplace. Some production never reaches the market and thus is not included in the GDP calculation. (An example would be someone who cleans her own swimming pool instead of hiring a professional pool cleaning service.) There are also unreported activities that are not included in GDP, such as a person who mows lawns and does not report the income.
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Suppose a company expects prices in general to rise by 5%, but the price of its product rises by 2%. How will the company respond to the price change?
A) It will increase production since it's getting a higher price for the product. B) It will increase production more slowly since it's price is rising more slowly than average. C) It will reduce production since it perceives a relative decline in the demand for its product. D) It will stop production and shut down until prices rise more quickly.
A typical indifference curve is upward sloping
a. True b. False Indicate whether the statement is true or false