GDP Is Not a Perfect Measure of Social Welfare and the Society's

question 127

Multiple Choice

GDP is not a perfect measure of social welfare and the society's economic well- being because:

• A) it does not include all economic activities in the economy.
• B) it does not say anything about the distribution of income.
• C) GDP accounting rules do not adjust for production that causes negative spillovers.
• D) all of the above.

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Definitions:

Real GDP

Gross Domestic Product adjusted for inflation, representing the value of all goods and services produced over a specific period, measured in constant prices.

Aggregate Demand Curve

A curve depicting the total demand for all goods and services in an economy at various price levels, assuming all other factors remain constant.

Short-Run Aggregate Supply Curve

A curve that shows the relationship between the price level and the quantity of goods and services supplied in the economy in the short term, assuming input costs remain constant.

Short-Run Equilibrium

The price level and real GDP that result when the aggregate demand curve intersects the short-run aggregate supply curve.