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Unformatted text preview: Part II: Essay Questions (choose 3 out of 5 questions, 4 points each) 1) As more people buy computers, the demand for internet services will increase, i.e. the demand curve shifts rightward. - The equilibrium price and quantity of internet service will increase. - The quantity supplied of internet service will increase as a result of an increase in the price of internet service, i.e. the movement along supply curve. 2) GDP will increase, as the government expenditure increases. NI will also increase, as NI = GDP +NFI –depreciation –Net tax. However, PI remains unchanged, as PI = NI(+$X) –Corporate profits minus dividends – Social insurance payments + Personal interest income + Transfer payments(-$X). 3) GDP may not be a good measure of the standard of living or “welfare” of the society as it does not take into account - Non-market transactions: Some production does not take place in any market (e.g.home production). This production is not reflected in the GDP and hence GDP understates the true level of production....
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This note was uploaded on 02/21/2010 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.
- Fall '09