Economists Do Not Use Actual Values of Real GDP to Measure

question 8

Multiple Choice

Economists do not use actual values of real GDP to measure economic growth because

• A) real GDP holds price level constant, but in reality price level changes from year to year.
• B) changes in real GDP could be due to fluctuations in the level of economic activity.
• C) economic growth encompasses more than just growth in output.
• D) changes in real GDP do not provide any information about income distribution.

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Definitions:

Initial Value Method

An accounting approach that records investments at their original purchase cost, without adjusting for changes in market value.

Partial Equity Method

An accounting technique used for investments where the investor has significant influence but does not fully control the investee, recognizing income proportionate to the level of ownership.

Equity Method

An accounting technique used to record investments in which the investor has significant influence but no control over the investee, recognizing the investor's share of the investee's profits and losses.

Partial Equity Method

An accounting approach used when an investing entity owns a significant but not controlling stake in another company, recognizing income based on the proportionate share of the investee's earnings.