Homework ECO201 Week 2

Homework ECO201 Week 2 - natural disaster of that...

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Chapter 23 Questions 1. Explain why an economy’s income must equal its expenditure. An economy’s income must equal its expenditures because there are two parties to each transaction. Every dollar is either spent or is counted as income. Each transaction is counted equally in a given economy. 8. Why is it desirable for a country to have a large GDP? Give an example of something that would raise GDP and yet be undesirable. As we learned in Chapter 23, GDP cannot measure quality of life indicators, but it stands to reason that a large GDP by definition would mean a higher standard of living or quality of life. In 2005 Hurricane Katrina hit the Gulf Coast. In the aftermath, there was a flurry of construction to rebuild the devastated area. Materials were bought and sold at a higher rate than normal. In a
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Unformatted text preview: natural disaster of that magnitude, the billions of dollars spent in reconstruction would certainly have bumped the GDP up for that quarter and probably that year. However, the quality of life of those affected by the hurricane would definitely be undesirable. Chapter 24 Question 1. Which do you think has a greater effect on the Consumer Price Index: a 10% increase in the price of chicken or a 10% increase in the price of caviar? Why? The consumer price index (CPI) is calculated with a fixed market basket of goods that is averaged over a period of time. A 10% increase in the price of chicken would have a greater effect on the CPI because a majority of people have chicken in their basket....
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This note was uploaded on 03/25/2012 for the course ECO 101 taught by Professor Lindsey during the Spring '12 term at Post.

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