GDP excludes most nonmarket transactions. Therefore, GDP tends to ________.
A. underestimate the rate of inflation in the economy
B. overestimate the rate of inflation in the economy
C. underestimate the amount of production in the economy
D. overestimate the amount of production of the economy
Answer: C
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The balanced-budget multiplier is equal to
A) 1. B) the reciprocal of the increase in government expenditures. C) the percentage increase in taxes. D) the percentage increase in government expenditures.
When there are two large open economies, the world real interest rate will be such that
A) desired international lending by one country equals desired international borrowing by the other country. B) desired international lending will be the same in both countries. C) desired international borrowing will be the same in both countries. D) desired international lending and borrowing will be zero in both countries.