37. When working with GDP, why it is important to understand and know about good

Question

37. When working with GDP, why it is important to understand and know about goods reaching their final selling point (a final good or service)

a. It keeps the price level even

b. It avoids making the GDP number too high by double counting of a good

c. It avoids inflation of the price level by not counting the price two or more times

d.It keeps exports and imports in balance

30. The quality/new goods bias of CPI means that the rise in the price of a fixed basket of goods and services over time tends to:

a. understate the CPI.

b. Overstate the CPI.

c. have no effect on the CPI.

d. Understate and overstate simultaneously

32. Hidden unemployment refers to the following:

a. Discouraged workers.

b. Underemployed workers.

c. Discouraged as well as underemployed workers.

d. None of the above.

Explanation / Answer

37) Calculating the price of only final goods (b) avoids making GDP number too high by double counting of a good. Double counting refers to calculating the value of the good more than once. When value of final goods are calculated, gdp value is based on the value of goods to the final consumer and excludes the value of intermediate goods as their value is already included in the value of final output.

30) Cpi is an estimate of inflation. Quality bias of cpi refers to increase in the life of a product when there are technological advances. But cpi doesn’t reflects such improvements. So cpi tends to overestimate inflation. (b)

32) Both discouraged and underemployed workers who are not reflected in official unemployment statistics are referred to as hidden unemployment. (C). Discouraged workers want to work but are not actively looking for work now. While the underemployed worker work less than their ability and skills.

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